Currencies can be backed by anything that has value. The earliest forms of currency were livestock and cowrie shells (the longest used currency in history), which pre-date metal coins. The first metal coinage was made in China around 1,000 B.C, and was made primary from base metals (like copper or bronze) rather than precious metals (like silver or gold). In another 500 years, coins evolved to be made from silver and other precious metals. From there, the concept of money evolved further from things with actual value to things which had intangible value, and that was the birth of fiat currency, a currency backed by the faith that governments will make good on their debts.
That formerly unshakable faith in the governments of the world is quickly crumbling for many around the globe, and those skeptics of government fiat are turning to new currencies, backed by things much harder to corrupt than governments, data. Bitcoin was the first cryptocurrency to be backed by the blockchain, an unalterable, encrypted yet transparent digital ledger. Due to the "mathematical difficulty of tampering the unique IDs encrypted into each block in the chain makes Blockchain immune to fraud."
Stop for a moment and take that in. We now have a currency that is immune to fraud, even livestock wasn't immune to fraud (take the example of cattle rustlers). You may be wondering, if a blockchain is just a collection of encrypted data, where does the value come from? If you are wondering that, go ask the RIAA or the MPAA how valuable data is, and remember that so-called pirated data was so valuable that it got entire websites shuttered. Not only does the blockchain provide a fraud-proof source of currency, it also is highly valuable in today's data-driven world, and likely to only become more valuable over time.
But not all cryptocurrencies are created equal, not all are supported by a blockchain, and some are backed by less conventional commodities. For example, take Cannabis Coin, a cryptocurrency backed by "pharmaceutical grade cannabis."
While it may sound like a great idea at first, since there is a lot of money to be made in the thriving cannabis industry, this makes about as much sense as backing a currency in wheat right before prohibition was repealed. The cost of cannabis is artificially inflated because of the black market, once it becomes legal the price will plummet, as will the value of any currency backed by it. Historically, there are reasons why currencies are most often things like metal or shells that withstand the test of time, rather than things that were perishable or consumable. Think about it. Cakecoin is a lie, and a terrible idea.
To make matters worse, cannabis is still federally illegal, and if the federal government ever needed a red flag to go after a cryptocurrency I can think of nothing better than drugs, as an unfortunate legacy from The Silk Road. But really, backing a currency by something federally illegal is utterly illogical. Could you imagine a Ransomcoin, where users "mine" by doing ransomware hacks? What about a PiracyCoin, where each download also mined a fraction of the next block? There are reasons why those don't have URLs, yet Cannabis Coin was seen to be a good idea.
Thankfully, Cannabis Coin is the only cryptocurrency that is actually backed by cannabis, though it has many copy-cats and admirers, but none foolish enough or bold enough to rely on cannabis for their value.
CannaCoin: Their website appears to be down, which is probably for the best.
DopeCoin: While it has some photos of cannabis plants and seeds all over the site, that is all it has relating to cannabis.
PotCoin: This is what DopeCoin wishes it looked like with a way better site layout and press releases. Also no mention of being backed by cannabis. PotCoin appears to be a a cryptocurrency attempting to offer cannabis businesses a way to bank, but a lot about it is not clear.
HempCoin: My honorable mention for Hemp History Week. HempCoin has utterly nothing to do with cannabis and certainly not hemp, it appears to be vying for the same niche as PotCoin.
The 6,000+ Year Long History of Hemp
What is the Difference Between Hemp and Cannabis?
Cryptocurrency and legalization of cannabis. Two things I can definitely see creating exceeding demand for the future of our generation. Great read.
Wait... The Cake(coin) is a lie?
While there is nothing backing some of these coins purportedly filling a niche in the crypto-space, I would ask, what is backing BTC other than the consensus is that mass-adoption is its value?
I'd argue BTC is backed by resources, primarily the highly valuable resources of time and energy, which are both finite, unlike paper money which we can pretty much print indefinitely out something (even fast producing algae). On the other hand, you can't print more energy as that would break the first law of thermodynamics, and it is not currently possible to create more time, though using Einstein's theory of relativity, theoretically you could have someone mining BTC in a time vacuum running circles around the rest of the universe, but they would be moving at speeds faster than currently possible to achieve, and one mus then wonder, would the BTC actually have value left after the costs of that space trip?
So, realistically, BTC has value because it is supported by non-renewable resources.
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