Backed by means you can exchange it for a fixed amount of the underlying asset. Fixed amount means that no matter how many currency units are presented for redemption, each one of them will be exchanged for a fixed amount of the underlying asset. If there is not enough of the underlying asset, it's called the system is operating on fractional reserve.
That makes sense and I admit I didn't know the proper definition of the term. But still, why would you want BTC to drop when the value of NXT would drop with it? NXT is tied to BTC until the majority of it is traded in fiat.
