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#2418·Erik OrrjeOP revised 4 days agoThe reason to back a currency with gold or some other commodity is that the commodity has other utility aside from being used as money. This sets a floor on the price, making it a store of value.
Utility is not a necessary aspect of money. Only 5-10% of gold's value is tied to its industrial use (https://www.statista.com/statistics/299609/gold-demand-by-industry-sectorshare/#:~:text=The%20jewelry%20industry%20accounted%20for,China%2C%20Russia%2C%20and%20Australia). Another 40% is used for jewellery.
This floor is not so reassuring if the asset were to plummet 50%. Other commodities, such as silver, have a greater industrial utility. That makes it less suitable as money since its value becomes tied to commodity cycles.
The reason to back a currency with gold or some other commodity is mainly due to its scarcity, which puts a limit on money creation (done through fractional reserve banking).
By the standard you have set here, you have implicitly disqualified Bitcoin and Zcash. If gold is not good enough because it could fall to its price floor (your claim being 50%), then Bitcoin and Zcash are even worse because they have no floor at all. It might be more precise to say the floor is zero.