I am watching Deadmau5 masterclass and he says you definitely need a proper DAC, and to not use the computer's builtin DAC.
What specs should I look for in a DAC, being just a starter/hobbyist music producer?
A DAC converts digital signals into analog ones. Since the mastering will generally be in the digital domain, you'd only need for proofhearing of your results. A built-in soundcard should work reasonably well for that, assuming reasonable components.
A good ADC for getting actual material from physical artists and instruments recorded seems quite more important to me (though I don't know how much material in Trance can actually be assembled completely in the digital domain from samples and synthesizers). Also most built-in soundcards suck quite worse at recording than replay, and in contrast to proofhearing, recording with them will have an actual permanent impact on the quality of the result.
When dealing with music for longer time, you'll be assembling a set of tools over time anyway. Lots of multichannel soundcards (or mixers with digital output) with XLR microphone inputs (and phantom power) will not be a limiting factor in your productions. Probably the most expensive acquisitions at the start will be good microphones and, well, a recording room. And stuff like arranger keyboards. In comparison, soundcards will be a drop in the bucket.
1) A DAC's job is to create an analog sound signal from digital samples. Digital audio is, at it's most basic, a series of digital samples that indicate the amount of pressure change happening at that moment (as determined by a mic creating an electrical signal based on those changes in pressure and then that electrical signal being recorded by an ADC, which is the reverse of a DAC). The DAC takes the series of samples and produces the analog signal that corresponds to the given samples, which in turn allows for the analog signal to drive a speaker so that we can hear the sound recreated.
2) There is a DAC in a SoundBlaster card, just like there is in your built in sound card, but this isn't what you are looking for when trying to do music production. Consumer sound cards generally provide relatively poor isolation from the impact of the computer itself. They also are designed for use with consumer components such as computer speakers that use different output levels than professional production gear and are designed for listening, not production. The DACs that you want for music production are designed to provide strong isolation, designed to provide accurate, analytical sound and provide signals that are directly compatible with professional audio gear such as studio monitors, PA systems and external processing gear. It provides proper ground isolation and other important features that are relevant to working as part of an overall signal workflow rather than just directly feeding speakers.
3)The exact features you should look for vary based on what you want to do, but I'd recommend looking for something with balanced inputs and outputs via XLR. On a lot of prosumer stuff, you can get hybrid connectors that will work with both 1/4" cables and XLR so that you can work your way up as you invest more. You also want to look at the bit-depth and sample frequency. 24-bit 96khz audio is a good starting point for producing music so that it can be mixed down to 16 bit, 48khz with minimal aliasing artifacts and other issues.
