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Should I replace my DAC for a 24bit one?

16 bit material produced from 24 bit masters using dither can yield more than 16 bits of effective resolution with good DSP in front of the DAC chip, at least technically.
 
True that. But even the very best high end 16-bit players of the 90s and into the early 2000s only reached 11 or 12 effective bits resolution. You had to spend nearly five figures on a digital front end to get much above that. Most decent 24-bit equipment can reach 20-bit resolution with a test stream.. So even a substandard 24-bit implementation with an effective resolution at 18-bits is going to sound considerably better up to the analog stage . . . PROVIDED the source stream is of similar quality.

And that was my earlier point. Many "24-bit" recordings are simply not that great sounding, because the source tapes or other masters were badly consoled over to 24-bits. When I have high resolution dreck, sometimes slightly lower resolution dreck is a little more palatable.

. . . and a crummy analog output stage can make it all fall apart at the end anyway.

In early to mid 1980s DACs used 16 bit chips. They all were ladder type. 4-8x oversampling was standard back then. Circuits around DAC chip were tricked to provide 17th bit of resolution to compensate for rounding in digital filter.

The best ladder type chips had 20 bits of resolution, though linearity of last two bits was questionable. Multibit delta-sigma chips today achieve 21 and closing to 22 bits of resolution and are somewhat more linear in these two last bits.

Today's digital filters are ether use 40 bit fixed point calculation to reduce required rounding or floating point calculations and practically avoid overflow. Of cause circuit around DAC chips adds noise and distortion, thus best DACs today show 21 bit of effective resolution from digital input to analog output.

22-23 bits is a theoretical limit of circuit working at room temperature. For anything better you need cryogenic cooling.
 
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