I still think you have it wrong; (Dynamic Audio) Compression does mean it may be using less of the dynamic range when taken overall, but the waveform will still

I still think you have it wrong; (Dynamic Audio) Compression does mean it may be using less of the dynamic range when taken overall, but the waveform will still take up the entire span of the available bit depth. Granted that with an optimal encoding this could be biased towards the "high" end (but bear in mind that would have to be both +ve and -ve), but I still think this would miss the point, and I think it would also create distortion in the 'zero' region of the audio. If you open up heavily compressed music in an audio editor (pick any recent EDM track), it will still cross the zero point, and have maximum and minimum levels present. It will also have 'zero' (i.e. 32768 if the range is 0-65536 in 16-bit audio) present - often at the beginning and end of the track, and the audio will be centred about that in the vast majority of tracks. I'm not sure the 1-bit extreme helps with understanding this, particularly because the audio we'd be dealing with will be a mix of many frequencies; the waveform is an aggregate of the overall 'signal' at each frequency present in the mix; this is one of the reasons why multiband rather than single-band compression has become so popular (as it allows you to get the 'max' in each frequency band rather than one band dominating the overall result of the compression). I think there's a difference to take into account when considering any given momentary sample and the overall effect - yes, compression does reduce the dynamic range of the music, but you would need some sort of variable bit depth which was linked to the instantaneous amount of compression being applied to get any kind of workable lower-bit-depth encoding scheme, which seems like a lot of complexity for no significant gain (to me?).