No, it’s the other way around, a tiny compromise in the digital noise floor for the benefits of no distortion. In practice though we get both, no distortion AND noise reduction, because we use noise-shaped dither which reduces the noise in the critical hearing band by 20 - 30dB.
You appear to think that the dither noise is more significant than the distortion it eliminates but in fact the opposite is true. Have a look at this image of the frequency domain effects of truncation vs dither:
This is a 1kHz signal, the yellow plot is the frequency result of truncation, the white plot is the same bit reduction using basic (triangular) dither. The horizontal lines (y-axis) are 10dB increments and the x-axis is 0Hz - 20kHz frequency (taken from page 8 of a dithering
PDF distributed by iZotope). Note that the distortion products are inharmonically related and would therefore be more noticeable/audible than uncorrelated noise of the same level but worse still, the distortion products actually peak around 10dB higher than the dither noise. Even worse, these distortion products are deterministic and correlated so they will sum at +6dB (in the case of mixing/down-mixing), while the dither is random and uncorrelated and therefore will sum at +3dB.
Here is a very short video showing the spectrogram of an original 1kHz signal at 24bit, then truncated to 16bit and finally converted to 16bit using noise-shaped dither. Notice the large number of distortion products with the truncation, then the complete lack of distortion products using noise-shaped dither at the expense of minuscule amount of noise in the critical hearing band and more noise starting around 17kHz, where our hearing is insensitive:
In this case it is, you really should understand at least the basics of dither if you’re going to make assertions about it! Didn’t you look at the image
@71 dB posted before you replied? Dither is summed with the signal, so you end up with the signal plus some noise. How isn’t that more accurate than nothing at all (no signal and no noise)?
G