A backed coin is a type of cryptocurrency that is supported by a tangible asset or a reserve. This backing can come from various sources, such as fiat currency, commodities like gold or silver, or even other cryptocurrencies.

The goal is to provide stability and reduce volatility, which is common in many other digital currencies. When users know that a backed coin has real assets behind it, they may feel more confident in its value. For instance, if a coin is backed by the U.S. dollar, each coin might represent a specific amount of dollars held in reserve.

This setup can help maintain a stable price, making it easier for users to transact without worrying about significant fluctuations. Backed coins often rely on trusted entities to manage the reserves and ensure transparency. Regular audits are usually crucial to maintain user trust.

Overall, backed coins offer a blend of the benefits of both traditional assets and cryptocurrencies, catering to those looking for stability in their investments.