Eli5 what it means when a currency is said to be backed by gold

Question

I see this all the time, mostly when references are made about the dollar and how it was once backed by gold

In: 164

Answer 1

With gold backing, a $20 bill is worth $20 because you can go and redeem it for exactly $20 worth of gold (however much that is as the very moment).

Without any backing, a $20 bill is worth $20 because you and I both agree that it’s worth $20.

In your day-to-day life there’s no difference because you’re paying for the same things with the bill regardless.