My camera has an engineering Dynamic Range of 14 stops, how many bits do I need to encode that DR?  Well, to encode the whole Dynamic Range 1 bit could suffice, depending on the content and the application.  The reason is simple, dynamic range is only concerned with the extremes, not with tones in between:

So in theory we only need 1 bit to encode it: zero for minimum signal and one for maximum signal, like so

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