Byproduct Mining Fallacy

There is a theory that mining can consume a necessary and unmarketable byproduct of production, thereby eliminating the energy consumption it represents. Examples include unused natural gas and unused computing memory.

Given a competitive market for these byproducts, they represent mining cost. In other words, they have become marketable. However, this also reduces the cost of producing the primary product, or increases its marketable value to the same effect. Given unchanged demand for the primary product, its supply necessarily increases to capture that demand.

The increased production necessarily consumes the same amount of energy that was being consumed as waste, invalidating the theory.

Bitcoin can consume the unmarketable byproducts of oil or gas drilling. To the extent that this represents a lower mining cost, the discount energy increases miner profit. This increases competition for it until the net cost advantage is eventually eliminated. In the interim this represents a profit opportunity.

This positive mining cost is also a negative drilling cost, increasing driller profit. This implies that all drilling eventually adopts this cost reduction, just as miners have done. The total of energy consumption remains unchanged, however usable energy supply has expanded.

This implies a reduced energy price generally. As such mining must consume more energy to consume the same cost. So to the extent that mining has reduced cost, it must increase it. Therefore energy cost generally cannot fall due to mining of the waste byproduct of drilling.

Furthermore, consumption of the byproduct does not imply a reduction in pollution. Productive consumption of energy (e.g. mining) is not inherently less pollutive than non-productive (e.g. flaring). Certainly this is not the case where encompassing property rights are enforceable.