Byproduct Mining Fallacy

There is a theory that, to the extent Bitcoin mining can consume a necessary and otherwise unmarketable byproduct of production (i.e. waste), a reduction in net energy consumption is implied. Examples include unused natural gas and unused computing memory.

Given a new byproduct market, the price advantage represents opportunity cost to each miner. Competition for the waste byproduct increases its price, potentially up to the level where the cost advantage is eliminated. In the interim this represents a mining profit opportunity.

The reduced cost of mining must result in increased mining so that its cost returns to the original level. Paradoxically, any reduced cost results in greater consumption. However the byproduct is otherwise "consumed" as waste. So its consumption in mining, even to a greater extent, does not represent any actual increase in its overall consumption.

The movement of mining from the primary product to the waste byproduct increases either the marketable supply (e.g. energy) or utility (e.g. computing memory) of the primary product. Given the assumption of unchanged remaining demand, these changes to supply or demand respectively imply lower price of the primary product.

Bitcoin requires the consumption of resources in widespread use, as an aspect of its security. Energy for example is a factor of all production, along with time and labor. Such fundamental resources tend to increase in consumption given reduced price. Furthermore, given that energy is a factor in all production, the cost of other products (e.g. computing memory) also reduce to energy, time and labor - with labor itself representing energy cost (e.g. food production).

So given the implied reduced price, production tends to expand accordingly (growing capital and therefore making people wealthier overall). This price stability is a general characteristic of all commodities. As such a consequent reduction in overall energy consumption cannot be assumed, invalidating the theory.