A lot of respected people, for example Doug Casey, used to say that cryptocurrencies are "backed by nothing” and therefore somehow inferior to the “full faith and credit of the US government”. But they have since changed their tunes after realizing that cryptocurrencies have far superior backing to those of big banks or governments. In fact, because of their immense power and faux legitimacy, there is no worse counter party than a big bank or government.
You would be far better off backing a currency with shares of Apple Stock, which is at least somewhat accountable to its shareholders and sensitive to its public reputation.
Cryptocurrencies can be backed by many things, including Apple Stock or gold in a reputable depository in a state that recognizes gold as legal tender (e.g. UPMA in Utah). In these cases there is still some counterparty risk in that either company could come under government coercion or internal scandal. But even in such cases, they would have some degree of backing value. If the backing collateral (value of the company) is more than double the outstanding currency, then this risk can be largely mitigated.
But the reason cryptocurrencies were invented is to completely remove counterparty risk. If you think of Bitcoin as the Decentralized Autonomous Company (DAC) that it is, and think of bitcoins as “shares” in that company, and the service performed by this company is to transfer ownership of those shares to anyone else in the world, then bitcoin is backed by the demand for its services and speculation about that demand - just like Apple stock.
Except that no one can seize your bitcoins like they can seize your Apple Stock.
Fancier unmanned companies are an even better counterparty free backing. BitShares is a smart coin factory and decentralized exchange and BTS is thus backed by the value of such a counterparty free, highly useful unmanned company. Priceless.
