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Tone
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Now, which is better? Well, that depends. Passive pickups output a high impedance signal, at least on peaks. Trying to send that load through a lengthy instrument cable will lead to attenuation of high frequency components. In other words, it will dull the tone of your guitar signal compared to a shorter cable. This can be avoided by using a most buffered bypass pedals, which will output a low impedance signal which will retain its frequency response through a longer stretch of cable.
Not all buffered bypass pedals are the same, however. A poorly designed bypass (or a pedal with a weak battery) may sound like its doing awful things to the signal, adding noise or altering the frequency response. When buying pedals, you should not only check whether the device is true or buffered bypass, but also read reviews on its transparency if it is a buffered bypass. Also, some devices are designed to receive the guitar's high impedance signal as part of how they work. Some wah pedals and many fuzzboxes are intentionally low impedance, creating an odd kind of distortion when fed a high impedance signal. Placing a buffered bypass pedal in front of such devices will prevent them from doing so. This may simply be a matter of arranging your devices in a certain order vs. using alternate devices. Amplifiers are typically high impedance devices, capable of accepting both high and low impedance signals without any change in tone - they don't care if you are using buffered or true bypass. If you notice a difference in tone when running through your pedal in bypass mode vs. plugging directly into the amp, the change is likely due to your cables or the design of the bypass circuit (or a weak battery in a buffered bypass pedal).