I see this all the time, mostly when references are made about the dollar and how it was once backed by gold
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The UK pound note used to say on it “I promise to pay the bearer on demand the sum of one pound” above a signature.
What on earth does that mean? Well in principle it means that you can go to the Bank of England, give them your pound note and get one pounds worth of gold (or maybe silver) in return. So the one pound note is essentially an IOU, and that’s why it’s just more than a piece of coloured paper.
This gets into the question of why is a bank note valuable at all. Why is a U.S. dollar bill worth more than a monopoly dollar bill? The modern reason is that we all mutually agree and believe that it is.
But this trust can can weak. A currency can get into extreme inflation and devaluation if people stop believing in it.
As a government One way to keep your currency valuable is this idea of promising to exchange your notes for gold (assuming that gold will always be valuable). But this assumes that you have a vault with enough gold to actual do it.
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