Could Amazons New Virtual Currency Rival Bitcoin?J.P. Hicks, Contributor Amazon calls the Coins an important step to create the most complete end-to-end ecosystem for building, monetizing and marketing their apps and games. How it Works: There have been several retail companies that have attempted incentive point systems to encourage loyalty at their platforms. There have also been a handful of virtual currencies to hit the Internet, mostly in-game currencies to buy virtual upgrades. Yet, there has never been a retailer to offer its own true currency to buy real goods, let alone one as dominant as Amazon. They have not specified how users will earn Coins or how their value will be determined. For this Beta rollout Amazon has been vague, saying its giving away tens of millions of dollars worth of Coins to its customers, and the value of each Coin will be arbitrarily set at $.01. Currently the most popular Internet-wide virtual currency is Bitcoin. Bitcoins appeal is that theyre not controlled by a central authority, they allow for anonymous transactions thus it is nearly impossible to tax, they can be exchanged for any currency, and the supply is regulated by a complex algorithm that will ultimately result in higher values. However, as popular as it has become, Bitcoin is still not accepted for many retail goods. Thats where Amazon has the upper hand if in fact they have aspirations of making Amazon Coins a viable alternative currency. The fact that they can offer a wide range of goods in exchange for this virtual currency holds incredible power. Amazon stands a better chance than anyone else because its customer base uses the company regularly, Yanis Varoufakis an in-game economist for Valve told The Verge. When entering amazon.com, at least for some people, it is a little like going to a foreign country. If this foreign country has its own currency and gives you discounts and various goodies provided you change some money into its currency upon entry, you may well do it. There has been some confusion about Amazons motivation for its virtual currency and just how it adds any value besides increasing customer loyalty, if it even does that. Anything thats going to help Android monetize anything at all is good, Kevin Galligan, president of Touch Lab, told The Verge. But how do you get Coins? They dont go into that. If you have to buy Coins, then I dont understand whats the difference between that and money. Its clear that theyre targeting boosting their app development business, but there are many ways to inject tens of millions into a certain area to boost business. Therefore, it seems that Amazon has bigger plans for their Coin scheme. Most states in America have begun to tax online sales which temporarily dampened business for Amazon. The Coins could conceivably help individual sellers avoid sales taxes if all income remains in house in a Coin wallet to be spent only within the Amazon community. So perhaps avoiding taxes is a small part of the motivation. Even though many customers have grown wary of incentive schemes and it remains unclear how Amazon Coins will add value to its business, if Amazon expands the program to their broader store and establishes a straightforward currency exchange for the Coins, its possible for them to make a huge impact in the world of online currencies. Amazon promises to give more details about the currency when they roll them out in May. Stay tuned. J.P. Hicks is an entrepreneur, pro blogger, editor of BlogTips.com and author of Secrets to Making Money with a Free Blog. 