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Why you can't just compare RGB values
Subtracting RGB channels and calling the result "how different two colors are" doesn't match how people actually perceive color difference — RGB (and even HSL) distances don't scale evenly with perception. Two colors 20 units apart in RGB space might look nearly identical in one part of the color space and clearly distinct in another. Delta E was created specifically to fix this by measuring distance in a perceptually uniform space instead.
How it's actually calculated
Delta E is computed in CIELAB space — a color space built so that Euclidean distance between two points approximates perceived difference. The simplest version, CIE76 (the one this site's calculator uses), is literally the straight-line distance between two LAB coordinates: the square root of the sum of squared differences in L (lightness), a (green–red), and b (blue–yellow). It's fast to compute and accurate enough for the overwhelming majority of design and development use cases.
Reading the numbers
Under 1.0 is generally imperceptible to the human eye. Around 1–2.3 is a "just noticeable difference" — detectable only under close side-by-side comparison. From roughly 2–10, the difference is noticeable at a glance. Beyond that, colors read as clearly, unambiguously different. The 2.3 threshold specifically shows up a lot in printing and manufacturing tolerances, where it's a common pass/fail bar for "close enough to the target color."
Where it's actually used
Print shops and manufacturers use Delta E to quality-check that a printed or manufactured color matches a target within tolerance. Design systems use it to catch near-duplicate colors that should probably be merged into one token. It's also the basis for "nearest named color" features — given an arbitrary hex value, Delta E finds the closest color in a reference set far more accurately than comparing hue values alone, since it accounts for lightness and saturation differences too.
CIE76 vs. newer formulas
Later refinements — CIE94, and especially CIEDE2000 — correct for some known perceptual non-uniformities that CIE76 doesn't fully account for, particularly around saturated colors. They're more accurate but significantly more complex to compute. For most practical purposes outside of demanding color-matching industries like textiles, CIE76 is accurate enough and far simpler to reason about.