I have read and read about the HDCD process and just quite can't get it.

A CD is not recorded at 24 bits; a CD is 16 bits. When a CD says it was taken from a 24-bit digital master, then it was sampled down to 16 bits using the technique of dithering.

In an HDCD recording, 4 more bits are encoded into the regular bit stream by adding random noise which the HDCD decoding chip will recognize as more than just random noise, and thus start to decode those extra 4 bits to add to the analog end product. These 4 additional bits are mixed into the regular 16 bits via the random noise.

This seems to indicate that there are effectively 20 bits to be played back. So why is a 24-bit DAC required, rather than a 20-bit DAC?

My guess is that perhaps a separate 16-bit DAC and 8-bit DAC are used because 24-bit DACs are too expensive to manufacture, and the hardware processs can only provide 20 bits, when using a separate 16-bit DAC and 8-bit DAC.

Anyone got the real answer, or have I misunderstood the whole process?