I wonder why AMZN stopped the Amazon Coin project?*
From IEEE Spectrum, December 1, 2023:
Facebook failed, but another tech giant might soon pull it off
Buying and selling cryptocurrencies is a big business. Bitcoin, for example, processed US $3 trillion worth of transactions in 2021, more than double what American Express did. But most of those transactions were just for speculation. The fraction that involved buying actual stuff (goods and services) is so small that it’s hard to measure.
What development might enable cryptocurrencies to displace the U.S. dollar as the dominant medium for exchange in the United States? It might look a lot like what Facebook (now called Meta) proposed with its Libra stable coin (which morphed into Diem). Although Diem suffered a fatal setback in 2021 when U.S. Treasury Secretary Janet Yellen refused to support it, that doesn’t mean that a related model couldn’t succeed. Indeed, Yellen’s refusal to support Diem suggests that she saw a private digital currency as a potentially serious competitor to the U.S. dollar—and hence to the U.S. Treasury.
Here I outline the rationale for such a private digital currency and explain how one might soon take off in the United States.
Corporate CashThe idea of private digital currencies goes back to at least 1994, when the late Edward de Bono wrote of the “IBM dollar.” In de Bono’s vision, “large manufacturing corporations” should create their own currencies, which could be used to buy their products. He saw this scheme chiefly as a way for companies to smooth out the volatility of sales and make their business more predictable.Facebook’s Libra proposal flopped. How might another private digital currency succeed where Libra did not?
It is important to attract a large block of customers quickly. This is sometimes referred to as “getting the flywheel going”—that is, operating on a large enough scale for the benefits to consumers from network effects to kick in. Facebook’s user base would perhaps have provided such a block of customers, but there is some psychological distance between social media and money.
That gap could be much smaller for other potential backers of a private digital currency. An important early paper (2015) by Joshua Gans and Hanna Halaburda on private digital currencies pointed out that “any currency can be viewed as a platform”—and it is the attractiveness of the platform on which its adoption depends.
Bezos BucksConsider Amazon, with more than 200 million unique visitors to its site every month. It has annualized sales revenue of about $500 billion a year. A staggering 167 million Americans have an Amazon Prime membership—a service that offers discounted or free shipping in exchange for a $139 annual fee, making Amazon their effective default shopping option for a vast range of merchandise. This large sticky customer base makes it plausible that Amazon could launch its own digital currency. Borrowing a few pages from the Libra playbook, it might look like this:The currency would have four pillars. The first involves the Amazon platform. Amazon would announce that from now on, while users could continue to pay by credit card for purchases, they could also use a digital currency called amazons. (I like Bezos bucks or BBs, but that might be a bridge too far, even for Jeff Bezos.) Customers could convert U.S. dollars into amazons—and, at least for the time being, they could convert them back, on demand, at a 1:1 exchange rate, perhaps for a small fee.
Using amazons for purchases would give users a discount off the regular purchase price, maybe 2 percent. That would give folks an incentive to use amazons. Indeed, Amazon already offers a virtual currency called Amazon coins, which can be used on the Amazon Appstore to buy certain apps and games and make in-app purchases. So amazons would be a natural extension of that.
As a platform that matches buyers and sellers, Amazon has considerable market power and leverage. In principle, Amazon could mandate that sellers had to accept amazons instead of dollars for sales in the Amazon marketplace. Such an arrangement would be unlikely to work in the short term, though, because amazons would be no use to retailers, who need to pay their suppliers in dollars—at least not at the start.
But if amazons were in sufficiently widespread use, this would be no problem. The challenge for Amazon would be to drive adoption of its currency without penalizing sellers on its platform. The smart approach would be to pay sellers some portion of their sale price in amazons—maybe 10 percent initially—and the rest in dollars. Each seller would have a digital wallet into which amazons would be paid. The amazons could be converted frictionlessly into dollars.
This approach would create a subtle but useful default for Amazon. Although it would not be hard for sellers to convert their amazons to dollars, the presence of amazons in their digital wallet, ready to be spent elsewhere on the Amazon platform, would offer an incentive to use them.
Paying interest on funds saved in the wallet would motivate sellers to park their money in an Amazon digital wallet rather than transferring it to their bank and earning close to zero interest there. The introduction of these features would provide a natural way for Amazon to offer other financial services for small businesses.
A Second Pillar.Pillar 2 involves Amazon Web Services (AWS), the world’s largest cloud-computing company. It started out as a means of running Amazon’s own platform and has since grown into a company that offers similar services to other companies and even university researchers....
And perhaps more specifically, sadly because the writer would then possibly remember that at 6:02pm. PST, Wednesday, February 13, 2013 we posted:
Amazon is Introducing "Amazon Coins" Virtual Currency (AMZN)
Amazon no longer has the actual announcement on their site but it is at the Internet archive: "http://web.archive.org/web/20130206133215/http://www.amazonappstoredev.com/2013/02/introducing-amazon-coins.html"
We followed up three months later with:
May 2013
"Amazon Coins Expands to France, Italy, and Spain – Submit Now for Amazon Coins worth Millions of Euros" (AMZN)
That was the headline at Amazon's Developer page.
I was reminded of this story while reading about Scotland coin. As far as I can tell AmazonCoin is the perfect cryptocurrency for.....Amazon."
And followed up again in November 2017: "Whatever Happened to Amazon Coin? (AMZN)
So here we wait. If they don't get cracking the Fed is going to roll out their CBDC and all the Bezos Bucks will be good for is paying the remaining employees at the Washington Post.
