Its more than just a great idea in principle. Its a way "money" becomes an accepted form of currency exchange.
From the 18th century, paper money issued by a government was "backed" a specific amount of gold. Once you could exchange the piece of paper for goods, as if it were gold, that was the establishment of paper money. Coins didn't require quite a conceptual hurdle, because minted coins had a specific amount of gold or other precious metal smelted into the coin. That is what's called specie currency.
In the 19th & 20th century, gov'ts would "back" their paper currency with some other form of valued commodity, if backing it with gold became to prohibitively costly. Its how the Nazi's broke the inflationary cycle caused by them printing out papermarks (german dollars). The bank printing rentenmarks backed the paper with the physical assets owned by the bank.
The dumbass cryptocurrency hipsters are so in love with their dream of bitcoin working as a governmentless currency, they fail to realize is that bitcoin is not money. Its not used as an exchange medium for goods (to a significant amount). bitcoin has no intrinsic value, like fiat currency.
What Rand Paul suggests would be what bankers have done for centuries in order to make a "new" currency acceptable. Granted, you're stuck with a form of centralized authority (but it doesn't have to be governmental) "backing" the currency with something of tangible value, but cryptocurrency fans would still be able to have decentralized transactions of bitcoin, without require active participation of a government.