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There used to be a significant difference. What about now?
Most inkjet printers use dye-based inks, but some photographers prefer pigment-based for a variety of reasons. Let's first talk about what each kind of ink is, and then the advantages and disadvantages of each.
Dye-based inks are the standard ink type used in inkjet printers. They consist of colorant that is fully dissolved and suspended in liquid. Pigmented ink consists of a very fine powder of solid colorant particles suspended in a liquid carrier. See Adorama's full selection of inkjet inks.
Epson Stylus Photo 1400 is a pro-level printer that takes dye-based inks.
Not so many clear-cut differences
Until a few years ago, the key advantages of dye-based inks was a wider color range and lower cost while its disadvantages were that it was water soluble—a single drop of water could ruin a print—and that prints would fade faster. Pigmented inks, conversely, lasted longer and more water-resistant, but had less color depth and were more expensive.
Today, however, there is little difference between current dye-based and pigmented inks, with the slight edge going to pigmented inks. Steady improvements in the inks' formulas have addressed the shortcomings of both types, and current generation inks produced by name-brand manufacturers are generally claimed to be fade-resistant to last a lifetime when used with the recommended paper.
Generally, pigment inks are marketed towards pro users, while lower-cost dye-based inks are marketed towards enthusiasts. Black and white photographers tend to prefer pigmented inks. However, a casual look at side-by-side prints will reveal only subtle differences that may only be appreciated by professional and serious amateur photographers. Even so, many pro printers are more than satisfied with dye-based prints.
Canon Pixma Pro 9500 Mark II uses 10 pigment ink cartridges.
Tips for better prints—No matter what you use
If you use a printer's recommended ICC profiles for the combination of paper and ink that you are using, image quality should be consistent when comparing dye and pigmented ink prints.
Epson makes both dye-based and pigment-based inks. Its UltraChrome Hi-Gloss, used in its high-end Stylus Photo R1800 printer, is pigment-based, and is rated to last 250 years, while Epson's Claria Hi-Definition, which is used in printers like its Epson Stylus Photo 1400, is claimed to last 98 years. Canon and HP also offer both dye and pigment-based inks and compatible printers.
Don't change inks in midstream!
The one major caveat about inkjet printer inks is that you should only use the kind of ink recommended for your printer. Pigment-based inks will quickly clog the ink jets of a printer that is designed for dye-based ink.