The limit is usually determined by the number of address lines and the number of states for each address line. The number of states is usually two (though there are some devices which can detect "floating" as a third state), and the number of address lines is rarely more than three, so 8 is the usual limitation of the number of devices of the same type on I2C.
There are digital potentiometers with up/down pushbutton inputs, which would could be used instead of an encoder, and there are some devices with "clock" and "direction" inputs. If you call one encoder output "clock" then the logic level on the other, at the time of the clock edge is determined by the direction of rotation, so it should be possible to interface directly with an encoder.
There are digital potentiometers with up/down pushbutton inputs, which would could be used instead of an encoder, and there are some devices with "clock" and "direction" inputs. If you call one encoder output "clock" then the logic level on the other, at the time of the clock edge is determined by the direction of rotation, so it should be possible to interface directly with an encoder.






