You are correct about the MP3 method of reducing file size. It is unlistenable to me. Perhaps, I should say though, that if I had never listened to anything but MP3 it might be OK. But that’s not the case and I can’t dumb down my ears to that format.
The first MP3 I ever heard was at 96K. I could not believe how good it sounded. “Just like a CD”. But then, I am from the days of analog and bad sound meant things like wow and flutter, limited frequency response and tape hiss. None of that was here.
Then I noticed that cymbal crashes had a sort of “swishy” or “aquatic” sound to them. I eventually found out that it was the low bit rate causing it. I did a lot of reading and comparison and, for me (with 58 year old ears), the “I can’t tell the difference” line is a bit rate of 360k. At that point it is “literally” identical to the original source, as far as my human ears can tell.
I use MP3 as my main format in my Zoom H4n to record live acoustic music (lately this means bluegrass). When played back on my home stereo, if you close your eyes you would think the guys are in the room.