From Marginal Revolution
One of the problems with commodity based currencies (hard or virtual) is that it diverts activity from productive activities. It used to happen with gold, where firms would focus on mining due to gold’s currency value and not on real supply and demand dynamics that mostly resembles today’s mining environment. And now it’s happening with Bitcoin, where instead of focusing on productive things like software, some engineers are focused on Bitcoin mining.
In reality, this isn’t the biggest problem. A major problem is the arbitrary inflation and deflation that comes through changes in supply (or lack thereof) and the market value of these commodities. We would have already experienced aggressive bouts of inflation and deflation with Bitcoin (as historically happened with gold). Not to mention that it helps make a financial crisis a full scale depression (here and here)
As Milton Friedman stated, commodity standards are justifiable for those favoring limited government but in practice have quite a bit of negative consequences that gives fiat currencies the advantage.