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I am interested in building a setup with KRK Rokit 8 G2, but I am not sure if I should go with an external DAC or purchase a soundcard to use. What the main differences between the two?

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A sound card includes a DAC by necessity, but is a more complex device in theory. A sound card is able to synthesize sounds rather than simply play back samples and may have hardware that is capable of modifying samples on the fly (such as applying effects). A DAC on the other hand serves only the purpose of taking a digital signal and converting it to an analog one. A sound card has a DAC built in, though it is generally not as good as a stand alone DAC of similar cost.

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A sound card also includes Audio inputs converted to digital by ADCs. Here's a traditional block diagram of the sound card and circled in red are the DACs and the ADCs: -

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Your computer is basically the PCI bus which the sound card plugs into.

There's a fair bit more in a soundcard than just the DAC part and of course the ADC allows you to record analogue inputs and ultimately make "real" songs or samples.

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