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 US government used to have an equivalent value of gold stored somewhere for every dollar that was in circulation. So if there was $1 billion of currency, the US government had $1 billion of gold backing it up. This can help build confidence as to what the “value” of a dollar is, since it is tied to the value of a widely priced, liquid asset. Gold was just convenient — you could tie it to whatever price you want to. A person could take a dollar bill and exchange it for a dollar’s worth of gold.
Compare that to today, the US dollar is not backed by a physical commodity. Instead, it is backed by the full faith and credit of the US government. Basically, the US government (generally) determines the value of a dollar based on the actions of its central bank. This type of currency is known as fiat currency.
There are positives and negatives to both forms of currency, although most countries have moved to fiat because it gives the government more control over the economy. For example, during COVID the US government “printed” trillions of dollars to give people and businesses so they could stay afloat, simply because they wanted to. If we were still on the gold standard, we would have needed to somehow mine or acquire enough gold to give currency to people.
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