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Hey man! Great question!
.WAV files vs. MIDI Notes have both pros and cons.
Generally, using MIDI Notes gives us producers ULTIMATE FLEXIBILITY and sound quality by being able to adjust our notes however we’d like (note length, note frequency [A4, B6, etc..), and even the loudness [velocity] of each note.. velocity can be used for volume, or if the VSTi supports it, can also trigger different “timbres” or “instances” of that same note with a different recording/sound for more randomness/realness!)
A .WAV file, while lossless (very high-quality), handcuffs us in some areas, such as being able to adjust an individual note’s volume (which is more powerful than compression!), or having the flexibility to go back and change the notes, or the preset from our Virtual Instrument for a different sound.
Note, when we talk about audio files within music production, they should ALWAYS be .WAV. (.MP3 is for listening purposes, not for making music, as they don’t have the same audio quality!)
The pros of using a .WAV file is the ability to easily chop/slice them, as well as remove audio abruptly.. which is very common for a cool “audio painting” effect.
Another big benefit of rendering to .WAV (also known as “freezing a track”) is CPU performance. Our CPU’s can play a .WAV file WAY EASIER than many MIDI Notes in a Virtual Instrument (especially if the VSTi has many “voices” per note, and many notes are being played at once [lots of chords]).
If your computer is starting to run hard, and you’re getting underruns, rendering some tracks to .WAV will allow you to stop using certain VSTi’s within that project, and improve performance.
I personally like to stay within MIDI and Virtual Instruments as much as possible for the ease of use, and backup purposes.
When you start creating new .WAVs for a particular project, you have to REALLY make sure you’re backing them up properly, but either way you work, compatibility for future projects is safe, but if you have many .WAV files rendered for a particular project, you’ll see you have to pay closer attention to backing up for long-term purposes!