There is still conversion happening under the covers that doesn’t preserve the 1-bit nature of DSD. When DSP is done in PCM, the steps are:
- Convert 1-bit to multi-bit (e.g. 64-bit floating point)
- Down-sample to a lower frequency (e.g. 352.8 kHz)
- Do DSP
- Up-sample back to original DSD frequency
- Convert multi-bit back to 1-bit using a delta-sigma modulator.
When DSP is done in “DSD”, this is what happens instead:
- Convert 1-bit to multi-bit (e.g. 64-bit floating point)
- Apply a low-pass filter to remove most quantization noise
- Do DSP
- Convert multi-bit back to 1-bit using a delta-sigma modulator.
It looks somewhat simpler, but depending on the DSP, it can be a lot more resource-intensive than PCM. This post describes this in more detail.