Quote from: Kilmyos on December 20, 2011, 09:13:21 PM

I'm obviously missing something, what does "money supply" mean other than the total amount of Bitcoins in existance?

I see that others have already used the terms real and virtual BTC. The money supply (at least in the meaning used in the article) is the sum of both.

The illusion appears because of the fact that your money at the bank is not real Bitcoin, it is a promise. Just like gold certificates are not gold themselves. If they are traded as if they are gold (or BTC), then the result is analogous to having more of those in circulation. We are not used to this separation, because with the fiat money we use everyday, there is no real thing, at least not in the same sense.

There is an advantage of Bitcoin over gold though. Keeping your money yourself, and making real transfers is pretty easy. That's why derivatives are unlikely to considerably increase the money supply.