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There are literally dozens of audio-video consumer devices offering optical audio outputs. These range from simple satellite receivers to iPod docking stations or dvd players. Even newer laptops are often equipped with Toslink outputs.
But how do you connect these to your home stereo system if you’ve only got rca analog inputs to work with?
Unfortunately, it takes a bit more than a simple adapter cable to make this work. Toslink outputs actually carry audio information in an optical digital form following the original Sony/Philips specification better known as SP/DIF.
This means you are going to need a digital-to-analogue converter (DAC) to perform translation of optical audio to rca. DACs are available in various price-ranges from $30 for a simple device from companies like Behringer up to several thousand euro products with selectable filter characteristics or sample rate conversion capabilities for demanding audiophiles.
If your goal is simply to send sound from A to B and get the benefits of galvanic isolation, a cheap entry-level device will fit the bill. Laptop computers can benefit immensely from an external DAC solution, too and you should definitely use Toslink outputs if they are available on your laptop. Onboard sound cards are often noisy and an external converter could therefore be a nice sound quality upgrade.
But if you desire the absolute best sound quality from your digital sources, you might want to look for a higher-end digital-to-analogue converter. Investing more money in a decent DAC will get you state-of-the art converter technology and top-class analog output stages that can vastly improve the sound quality of all your digital sources. In addition, you are often receiving lots of practical bonus features such as multiple digital inputs covering USB and coax as well. A headphone amplifier is also a great add-on feature if you primarily listen from headphones
If you are looking for a true gem in the audiophile world, check out my sub-50$ DAC review.
In addition to digital-to-analog conversion, you may need a device that can convert optical Toslink signals to coaxial digital outputs. This is exactly the case when your DAC or receiver supports coaxial inputs but lacks optical inputs. Amazon offers a wide range of miniature devices that can help you convert Toslink to coaxial (advertisement).
Check out my article on how to cheaply add optical inputs to any DAC