Let's say 100% of income comes from block rewards of 1 BTC. If it costs 0.5 BTC to mine a block then miners will beef up their mining capacity so they can mine

Let's say 100% of income comes from block rewards of 1 BTC. If it costs 0.5 BTC to mine a block then miners will beef up their mining capacity so they can mine more. In a vacuum, this would be great, but because of how mining works (winner takes all), the cost of mining would go up as the number of miners increases. This will keep happening until the cost to mine is close to or equal to 1 BTC (and because of currency conversion, the cost might even exceed 1 BTC today but miners are hoping that the price goes up so they can sell at a profit). Let's say tomorrow, the income is cut in half. All of a sudden, most of these miners would become unprofitable and stop. However as a result, the cost of mining will go back down to 0.5 BTC. It's a self balancing system but that also means that it's fundamentally flawed for reasons mentions by previous commenters in this thread.