How do you know if you are upgrading your DAC?

I went from an Oppo 105 to a Mytek Manhattan I a few years ago.  Same DAC chip but no comparison-the Mytek blew the Oppo away.  Suspect you can find many dedicated DACs with the same chip as the 205 that will similarly outshine the 205.  I eventually moved to a Bryston DAC3 featuring an AKM chip.  The Bryston and Mytek can both be easily had from Internet dealers (Audio Advisor, Music Direct, others) that have full return policies, and both are made in North America.

The only sure fire way of being sure you have upgraded your DAC is to buy a turntable and compare. The better the upgrade the more it will sound like a record. That's how you tell.

Generally as you move up the food chain you get more DAC for the money.  Sort of like buying wine.  I started with a Schiit Yggdrasil- nice DAC, then a Wyred4Sound DSDv2.2SE- better DAC, then Denafrips Terminator- really really good DAC and now Denafrips Terminator Plus- kinda special DAC - may be my last DAC ever.
Denafrips is a Chinese company, prompt excellent support and customer service.  I also have their Iris DDC and am blown away by the benefit of USB to I2S conversion and clock out with the Terminator Plus.

How do you know? You listen to many of your trusted reviewers who have tested them. When they, and others, are all dumbstruck on how good it is, well, you make a decision.

Which is why I have a Denafrips arriving next Tuesday. Not sure it will compete with my vinyl rig, but most seem to think it is a big step in that direction. Sold me.

As good as the Oppo is, it’s internal DAC can probably be ‘beaten’ by a number of newer stand-alone DAC’s today.

The OPs question might as well apply to any component in the chain.