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Here is Everything You Need to Know about Rotary Encoder
Encoder

Rotary Encoders can be either magnetic or nonmagnetic. The sensor in a magnetic rotary sensor is passed through a spinning disc with alternating (north and south) magnetic zones. The sensor detects minor changes in the magnetic field using either the Hall effect (change in voltage compared to electron deflection in the magnetic field) or the magneto resistive effect (a change in resistance caused by the magnetic field).

Electrical rotary encoder sensors are a little more complicated and are normally controlled by the rotation of a shaft attached to the Encoder electronics. The shaft is linked to the encoder by a component known as the hub. When the shaft spins, the disc (which contains both solid and translucent lines) rotates across the encoder's circuitry. Light-emitting diodes (LEDs) are used in the circuitry and can be detected using a photodiode. The rotational speed is determined by the speed of the shaft connected to the encoder. To identify each line on the rotating disc, each concentric ring in the rotary encoder has its own light source. The detector signal is then transformed into an output that offers feedback on the sensor's position or velocity.

Read More- https://cmiblogdailydose.blogspot.com/2023/04/encoder-is-sensor-that-has-wide-range.html