The Digital Crown seems to have an encoder system, like the Nest Thermostat, to read the spinning of the dial.

Rotary encoders work by translating the angular position of a shaft into analog or digital code that computers can understand.

The encoder branches off of the button cable, along with the single push button and the diagnostic port contacts.

All these peripherals leave us wondering whether Apple has any intention of offering an upgrade program for the Apple Watch. Stripping out the internals will be difficult and time-consuming—not the sort of thing your local Genius is equipped to handle, but we suppose Apple could provide a mail-order option.