I deliberately left this out as i was aiming for a exceptionally basic explanation for those who are experiencing cryptocurrencies for the first time and may have a case of information overload.
Besides all government backing does is add to the perception of value by making people feel their money is secure. Even the IMF admit flat money is essentially worthless.
" Fiat money is materially worthless, but has value simply because a nation collectively agrees to ascribe a value to it. In short, money works because people believe that it will."

And that belief in the value is crucial to it's success.

"Belief can fade
Countries that have been down the path of high inflation experienced firsthand how the value of money essentially depends on people believing in it. In the 1980s, people in some Latin American countries, such as Argentina and Brazil, gradually lost confidence in the currency, because inflation was eroding its value so rapidly. They started using a more stable one, the U.S. dollar, as the de facto currency. This phenomenon is called unofficial, or de facto, dollarization. The government loses its monopoly on issuing money—and dollarization can be very difficult to reverse."

Both quotes taken from the imf's back to basics blog post which you can find here http://www.imf.org/external/pubs/ft/fandd/2012/09/basics.htm