Currency backed by gold, not an illusion.
what can you do with gold that you cannot do with bitcoins?
it has value because is rare, period
can be used in manufacturing of some electronic components, but it is not only option... ~90% (?) of its value come from limited supply not from any kind of actual usefulness
same with diamonds
Gold does not have value "because it is rare, period." There are many rare things - for example a blue cactus is rare, why has it not become the foundation of the global monetary system? Gold is valuable in
part because it is rare, but rarity alone is not a sufficient condition for value.
The real reason gold is valuable is because it has a unique set of characteristics that make it effective as a money (and there are wonderful parallels to Bitcoin in this regard). This piece explains it:
http://bit.ly/dk0VzYSimilarly, Bitcoin's value comes only in part from its rarity - but the larger part of value is its effectiveness as money due to its characteristics (secure, private, decentralized, diminishing rate of inflation, etc.)