2bz,
Yes, it is true that The Wadia 381/381i CD Player provides attenuation while the signal is still in the digital domain. And while many prefer that this function be performed in the analog domain, Wadia uses a proprietory digital volume control. And as there are always two sides to every coin, just because something is done in the analog domain does not mean that it is perfect or correct. Many analog circuits, switches, and wires can and will cause sonic degradation.
So perhaps the better question to ask would be whether the Wadia volume control compromises resolution?
Wadia answers that as follows:
"The Wadia 381/381i CD Player uses the latest generation of Wadias proprietary digital volume control. The volume level can be varied in the digital domain by means of mathematical manipulation of the signal, eliminating the distortion and noise that are inevitable with even the best analog volume controls. While conventional thinking indicates that reducing the volume digitally can sacrifice low level resolution, Wadia has created an innovative solution. Wadias patented digital filtering algorithm produces a 24 bit output rather than the 16 bits stored on the CD. This high-resolution signal is then used in the computations which in turn reduce the volume level. This
new signal is fed directly to the DAC chips. Through this innovative method, the Wadia 381/381i CD Player maintains high resolution even at the lowest volume control settings."