With the rise of computer-based high-end audio playback, a very interesting question is whether it is best to perform volume control in the digital or analog domain. I have done some experiments in this area, and I thought I might share some of my thoughts on the subject.
The very best DAC/preamplifier combos have sufficiently low noise that they can resolve perhaps the 21st bit and even the 22nd bit of an audio signal. However, you may have to choose between that and buying a fast car to achieve that level of performance! The merely "very good" are capable of resolving the 19th to 20th bit as a rough guideline. If you implement volume control in the digital domain, every 6dB of attenuation results in the loss of one bit of resolution. If you play back music music with 24-bit bit depth, then all volume control results in irrecoverable loss of data via bit-depth reduction. However, if you play 16-bit music, and pass it to your DAC in 24-bit format (something which most high-end DACs require anyway), then, depending on the quality of your DAC/preamp combo, you can in principle dial in up to 18-36dB of attenuation without audibly truncating the the music data. All this assuming that your digital volume control is done in a first-class manner using a 64-bit audio engine or its equivalent, as implemented in BtPerfect.
So that's the theory.
On the other hand, volume control performed in the analog domain requires passing the signal through some sort of variable attenuator – such as a potentiometer, an active electronic equivalent, or a switched resistor ladder. These components do actually degrade the sound, and to quite an alarming degree! If you are in the habit of "tweaking" your audio equipment, you will know that a hardy market exists for after-market volume control potentiometers costing up to thousands of dollars each (!!!) to try and eliminate these sonic defects. So the answer to the question boils down to whether or not the sonic degradation introduced by Bit Depth reduction is less intrusive than that introduced by a preamplifier's volume control.
As it happens, I have done some extensive listening tests on this subject, and I have surprised myself by the conclusions I have drawn. Regardless of whether the music is 16-bit or 24-bit, I have found that performing volume control in the digital domain is qualitatively superior to performing it in the analog domain. And the difference is not subtle – it is really quite massive. No contest, actually. I will temper that statement by saying that it for sure depends on the preamplifier you are using and the volume control circuitry it implements. For example, I had a chance to discuss this with Dan d'Agostino, and while he agrees with me, he assures me that his new $30,000 preamplifier has a volume control that introduces no sonic degradation whatsoever!
There is a significant practical downside to performing volume control in the digital domain. Basically, your DAC is connected to a preamplifier permanently set to maximum volume. Depending on the rest of your audio equipment, the consequences of accidentally playing music at maximum volume may represent a risk that you are just not willing to take. Most computer playback systems have a user interface that has not been designed with this concern in mind! You would have to be very particular indeed about the procedures you go through each time you start to play music.
In my case, I run my Light Harmonic Da Vinci DAC directly into the inputs of a 300W/ch Classe CA-2300 power amplifier, feeding B&W 802 Diamond loudspeakers. All of my serious listening is done with about 20-30dB of attenuation dialled in by BitPerfect using the iTunes volume slider. I find this to be massively superior to routing the signal through my Classe CA-800 preamplifier with all digital attenuation turned off and a truly "bit perfect" signal passed into, and attenuated by, the preamplifier.
As this subject is taken up by a wider audience, and more different system configurations are evaluated, it will be very interesting to see what sort of a consensus emerges.
[UPDATE] Since writing this post, the notion of digital volume control - if properly done - being potentially superior to analog volume control, has more or less evolved to become mainstream thought. Only the very highest-grade (and, generally, highest-priced) preamplifiers can offer analog volume control with a remotely comparable performance.
My reference system has also changed. I now use a PS Audio DirectStream DAC, and I listen to a lot of music in DSD format. The DSD aspect has a great deal of impact on the concept of using digital volume control, because you cannot perform that type of manipulation on a 1-bit bitstream. At least not easily, and the issue of its impact on sound quality remains unresolved. I cannot therefore dial in 20dB of attenuation in BitPerfect using the iTunes volume slider.
The DirectStream DAC processes the incoming digital data in its own unique way. It converts all the incoming data to a 28MHz 30-bit PCM format, and then converts that to DSD128 which is fed natively to the output stage. This enables them to perform essentially lossless digital volume control on the signal while at the 30-bit 28MHz stage. I can access this stage of volume control using the DirectStream's remote control. My Classe CA2300 power amplifiers have now been replaced by PS Audio BHK-300 Signature monoblocks, also 300W/ch, so I still spend most of my listening at a setting with 20-30dB of attenuation dialed in. The DirectStream offers a neat solution by providing a switch to toggle the gain of the output stage up or down by 20dB. By engaging this switch, I can introduce an essentially lossless 20dB of attenuation at the analog output stage, and run the digital volume control in the 0-10dB range, which is close to lossless.
To add to the fun and games, PS Audio have released a 'BHK Signature' preamplifier, which sits between the DAC and the power amplifiers, with the DirectStream's volume control set to maximum. I haven't heard this product, but Paul McGowan of PS Audio claims that the system actually sounds better with the preamplifier installed, which goes against all apparent logic. If it does, though, then the only explanation to my way of thinking must be a less-than-ideal electrical interface between the output of the DirectStream and inputs of the monoblocks, which is corrected by using the new preamplifier. Aaaah yes, the black art of analog electronics design. In many ways, digital is soooooo much simpler :)