By Marcy Bonebright, dealnews Senior Staff Writer Earlier this month, Amazon announced that it will introduce Amazon Coins, a new digital currency for its Kindle Fire Appstore. Thus far, the shopping behemoth only intends for the coins to be used by U.S. customers to purchase apps on the Kindle Fire. Whether you actually use the currency, however, is entirely up to you. Amazon hopes to whet the appetites of wavering shoppers though by initially "giving out tens of millions of dollars worth of Coins to customers to spend on Kindle Fire apps, games, or in-app items," according to a press release. That obviously sounds appealing (free money always does!), but should you bite? Pitfalls to Digital Currency Systems The Amazon Coins announcement raised some eyebrows, given the current state of such proprietary currency systems. According to Popular Science, Amazon Coins joins the ranks of "other virtual currency minting operations," such as Bitcoin, Second Life's Linden Dollar, Facebook Credits, Microsoft Points, and Nintendo Points. The publication points out, however, that although some of these invented currencies were pinned to the dollar, they "had bizarre exchange rates," which lead to customer confusion. The Amazon Coins FAQ suggests that the merchant wants to sidestep any exchange rate complaints, stating that "One Amazon Coin is worth one cent, so if an app costs $2.99 it will cost 299 Amazon Coins." Even the apparent simplicity of this exchange rate could be misleading, though. It's easier to go overboard with spending when you use a digital currency, because it doesn't feel like you're using "real money." Moreover, according to Forbes, "People buying Coins are unlikely to spend all the Coins in one transaction. Which leaves Amazon with a nice cash pile of purchased but unspent Coins. It might not start out large, but if Coins becomes established, with millions of users, expect Amazon to work this reserve for their benefit." Furthermore, at the moment, Amazon Coins cannot be redeemed for dollars. The Coins will act like store credit in the Kindle Fire Appstore. "My biggest concern is that Amazon Coins are a way to suck me and my money into the Amazon financial ecosystem and to make it hard for me and my money to leave," read a CNET article. "Anytime somebody tries to persuade you to use their own special form of money, ask yourself why it's worth sacrificing the flexibility of real-world currency." Who Benefits Most from Amazon Coins? One group that should be excited about the creation of Amazon Coins is Kindle Fire app developers. Amazon's press release promises developers that the currency won't negatively affect their bottom line: "There's no integration required — you'll get paid the same 70% revenue share whether the customer chooses to use Coins or their own money." When Amazon gives away its Coins in May, app developers can expect an influx of Kindle Fire users ready to spend the "free money." Plus, this will greatly incentivize customers to spend more time in the Kindle Fire Appstore, possible driving business away from Amazon's main app competitor, Google Play. (Kindle Fire tablets use a heavily modified version of Google's Android OS.) In fact, it's speculated that this is the driving motivation for the entire coins scheme in the first place. What to Expect from Amazon Coins in the Future The biggest question is whether Amazon Coins will remain limited to the Kindle Fire Appstore, or if the mega-retailer will eventually allow the currency to be used on its main site. "The narrowness in scope is purely a decision," said Indiana University Associate Professor Edward Castanova, according to Upstart Business Journal. "If they're going to do this in this narrow area, they have the technology and the functionality to do it for everything." If Amazon Coins become popular with Kindle Fire customers, the potential profit for this new currency could be almost limitless, given Amazon's huge online presence. Readers, what do you think about Amazon Coins? Are they just another gimmick, out to separate you from your dollars? Or are you excited about the prospect of (initially) free money? Developers, are you more tempted to create Kindle Fire apps? Sound off in the comments below! Photo credits top to bottom: Amazon, The Economist, and Market Intelligence Center Related dealnews Features: Connecticut Shoppers Will Pay Sales Tax on Amazon Purchases Soon Tax Software Reviews: Free Tax Filing, State Price Comparisons If the Shoe (Virtually) Fits, Will You Buy It? Follow @dealnews on Twitter for the latest roundups, price trend info, and stories. You can also sign up for an email alert for all dealnews features.