Amazon + Google collaborate on crypto-currency??

Hard currency these days isn’t backed by anything more than a universal belief system, so the argument is that crypto-currencies can be an alternative or replacement. But that belief system didn’t happen over night, it evolved over many centuries. And until recently it was backed up by, for example, the gold standard.

A new digital currency won’t easily be adopted by the masses, because it lacks faith and tangible backing. To succeed it will need the following, none of which Bitcoin or the other contenders have:

  • Easy to use
  • Can’t be stolen
  • Stable value
  • Backed up with something tangible

Ease of use, and can’t be stolen, are inevitable as crypto-currencies evolve, someone will solve those in due course. Stable value is easy — peg it to the US dollar.

Tangible

But what if the “tangible” goods could be magicked out of thin air? We live in an increasingly digital world, and a lot of the products we buy are not physical at all, but they still have value to us: books, movies, video games, software and songs. A Marvelcoin could be valued at $10, because that is what people are willing to pay to download the latest Marvel movie. Yet if everyone on the planet wanted to redeem their Marvelcoins, it wouldn’t bankrupt the operator. Digital copies cost nothing to create.

I envisage a marketplace for all things digital — books, movies, video games, software and songs — that has a never-ending supply of products for sale. Operated by the folks behind NewCoin. They would have a deal with their suppliers that says if there is a run on their currency, their cost price for the products drops to zero or close to it.

Once people know that NewCoin is ultimately redeemable, they can treat it like hard currency and trade it in a never-ending circle where it rarely actually gets redeemed.

Distribution & Seeding

A government could partially pay employees with a digital currency, as a way of seeding it: governments are typically a country’s largest employer. And government-backed digital currencies are probably inevitable, but they won’t get there without private innovation first.

Google?

Google is a great example for the “who” of this idea, because they also sell digital products. So even though NewCoin is redeemable for digital goods, it can be used as a currency that goes round in circles without being redeemed.

Google gives an AdSense publisher some NewCoin. That publisher spends NewCoin at an online store. That merchant then uses the NewCoin to…. and we hit a snag, because merchants don’t want to be forced to buy something online with the NewCoin revenue. And don’t want to be buying digital consumer products from Google either. If only there was something digital that every business needs to spend money on…

As is happens, Google also runs Google AdWords, so they could make NewCoin redeemable there as well. It could work as a source of new business. Google already gives away free ads to charities, and seemingly it doesn’t affect their bottom line by doing so.

Google has the redemption covered, mass products where they give and receive money to millions of customers and clients, and the technology to make it all work. But would they have the trust of consumers?

Amazon?

Amazon has a lot of suppliers who get paid. And a large affiliate program. And an ad program. And a store that sells non-digital products. And digital as well.

Amazon isn’t a good a fit as Google, because it would be harder to convince suppliers to receive some money as NewCoin. But they could work out a way to subsidise the adoption until it took off.

Then just add Microsoft as a “technology partner”, plus a couple of smaller players with credibility, and shun Apple because they wouldn’t join in any way, and NewCoin can launch:

  • intrinsic value to both businesses and consumers
  • pegged to the dollar
  • has a sufficient user base for other online merchants to start accepting it
  • can survive a “run on the bank”
  • major technology companies with massive data centres

Initially people wouldn’t keep too much NewCoin in their virtual wallets. But with time they would see that it is safe, and some people will store a lot of it. And decades from now it could be un-pegged from the US dollar, and become a private, global currency.