I believe that the coil delivers water to the bottom of the chamber that has no oxygen as it was used up in the beginning of the coil. The denitrifying takes place in the later part of the coil where the oxygen has been stripped from the water. The bio balls provide more surface for the bacteria that lives in oxygen starved environment so you get that extra anoxic area for the denitrifying bacteria to grow. Yes the system has to be sealed from outside air and from light as you don't want algae growing.
If I've got this wrong please let me know.
Doug
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