Amazon Coin

Amazon has officiallly launched its own micropayment currency, called Amazon Coin.  Currently, one ‘coin’ is worth a penny, which makes it somewhat simple for calculating the exchange rate. It is designed for buying digital content for the Kindle, from books to apps, and customers buy or earn Amazon Coin in order to load their account.

With a name like “Amazon Coin”, there’s sure to be comparison to the BitCoin phenomenon, but they’re nothing alike.   Getting an Amazon Coin will be akin to sticking a $10 into the arcade token machine and getting forty brass tokens to stick into the pinball machine.  A Coin is worth one hundredth of a dollar; when the dollar fluctuates, so will the Amazon Coin.  Calling it a ‘coin’ is a bit of a misnomer; in the business world, internet currencies are “tokens” or “coupons”; only governments make coins.  But, whatever symantics Amazon thinks having online coins will avoid scrutiny from governmental entities is their own problem.

So why even call a “Coin” something different?  Why not just call them Amazon Gift Cards – which are already a thing, a way to get your money into Amazon in bulk to use for smaller transactions.  One thing about it being a “Coin” is that it becomes a purchase transaction, rather than a gift card which is increasingly regulated as persistent storage for money.  I’ll bet that there will come a day when app developers and participation in the Mechanical Turk will have the option of being paid in Amazon Coins.  This makes Amazon a barter-world: you do work that earns Amazon real money, and in payment you get tokens to spend at the Amazon store.  Sounds a bit like company scrip, don’t it?  Scrip isn’t horrible, as long as it isn’t misused.  Amazon isn’t dumb enough to require all transactions to be made with the same virtual money system, but if they did they wouldn’t be the first to try and restrict payment options.

Buying Amazon Coins diverges from the gift card model when you try and buy them: the more Amazon Coin you buy, the deeper the discount you get.  Spend $90, get 10,000 tokens (equivalent of $100).  Let’s see a gift card do that – even though there’s no real reason a gift card couldn’t have bonus dollars loaded during the transaction.  You can buy a gift card and then sell it to somebody; there’s a transferability in it.  Amazon Coins, not so much: according to the terms of use, you can’t transfer them or redeem them for cash.  You’re stuck buying products from Amazon – but you can bet that somebody will figure out how to capitailze on the 10% bonus and come out ahead.  But, since this is a retail transaction, Amazon can decide to stop selling coins to somebody if they don’t want to.   All this puts more control in Amazon’s hands, which doesn’t always sit well with people — which is why eBay relaxed their PayPal requirements for sellers.

The other benefit for Amazon, aside from giving free Coins when buying the tokens, they can just hand them out willy-nilly without using coupon codes or other odd redemption processes.  If you own a Kindle Fire, you’re getting $5 in Amazon Coin just for free, to encourage the use of the system.  Go ahead and spend them, but be careful when converting your dollars into Amazon Coin: be aware of what you’re getting for your money, like any other product you might buy.

eBay Gold Prices

So, the price of gold dropped precipitously a few weeks ago.  One of the selling points that nearly every gold seller makes is that “gold coins tend to retain their value when the price of gold drops.”  So, I decided to test it.   When I was researching my “rooster” post a couple months ago, I took down some average prices of gold coins on eBay.  It’s not particularly scientific, but eBay can show you closed auctions and what they sold for, so you can put together a sample of 50 or a hundred retail sale prices and get a picture of actual money paid for a coin.

Since then the price of gold dropped, so now I had a good use for the data:   if I look today, a few weeks after the fall, will I see coins still priced about the same as they were pre-fall, or a softer fall, or no fall at all? Here’s the numbers:

Coin on eBay Feb Avg Apr Avg % Chg
20 Franc Rooster $345 $320 -7%
10 Franc Rooster $221 $204 -8%
$5 Eagle $460 $438 -5%
$10 Eagle $954 $809 -15%
Average per oz $1993 $1819 -9%

I sampled coins from a space of about three weeks, from just after the big drop, and I got the “average per ounce” based on the actual gold content of each coin.

When I sampled coin prices in February, the price of gold was $1591 an ounce, and had been pretty close to that through the sample period.   The price of gold has changed significantly in the past couple weeks, but we can see how close eBay stayed to the price of gold by using our average loss per ounce from eBay and see how close to the actual numbers we are.

7% $1479
8% $1463
5% $1511
15% $1352
9% avg. $1447

Well, now, that looks like a pretty even cross-section of prices that an ounce of gold went for over the past few weeks, doesn’t it?

At first glance, my reaction was, “woah, gotta buy some cheap $10 gold coins”, but like I said, I was rather unscientific: it’s likely that when gold hit the bottom, people went for the big coins first, and the average for $10 is a bit skewed versus the smaller 10 Franc coins which saw less of a drop.   What this sampling should show is that gold prices on eBay, and prices of gold coins in general, don’t necessarily keep their value when the market price of gold drops.   Coins are an easy way to be certain of how much gold you’re getting with a degree of protection against fakery, but it isn’t safer than a gold fund or buying bars of bullion from somebody.

(Footnote on the price per ounce on eBay: eBay coins on average carry a 20% to 25% premium, according to my sampling. Keep this in mind when buying – you pay more on eBay than at your corner coin shop)