Actually, Bitcoin is not backed by anything. There are new alternatives that are being created that are backed by gold/silver to rival the Bitcoin. Bitcoin generates it value by controlling the amount of Bitcoin on the open market and watching the demand for the product. If you were on the ground floor, you would have realized profits of over 100x of your original investment. I think right now, that people are using this currency to avoid some taxation and other fees not to mention profit.
So for Bitcoin users, it is basically a faith based backing that keep Bitcoin afloat, along with controls of the quantity available on the market. What I don't fully understand is how it is digital. Seeing as though hackers can break into anything these days, I would be concerned that someone could steal Bitcoins - virtually or create fake Bitcoins - virtually. If you play with the quantities on the market or better yet, if people hear that their holding of Bitcoins is being diminished by fake Bitcoins, the value will be even more volital than today. Not to mention, all the governments are going to figure out how to get their beaks wet in that profit stream if it continues.
Edited: Vincenzo on 23rd Mar, 2014 - 1:45am