1 bit systems operate in the 3 MHz sampling rate range, not 44.1 kHz.
They could be getting the additional dynamic range (120 dB rather than 96 dB)
by nonlinear conversion. Some of the earlier pre-DAT, pre-CD digital audio
systems (and the audio system on early 8mm camcorders) used a nonlinear 12 bit
system. Essentially these systems say that up in the upper volume levels the
step from one encoded audio level is small, but that at lower levels the steps
are larger. This yields a wider dynamic range, and hence lower noise floor, at
the risk of audible "stairstepping" in the lower level signals, since the
larger change from one encoded level to the next is closer to being noticeable.
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