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Evo-Key: does a proper transponder key need to be in the ignition to drive or would a key that doesn't have a chip work?

We have a Toyota Matrix 2005 and it's transponder key only works intermitantly. I'm considering installing a tansponder bypass like this one (and maybe a remote start while i'm at it) with the hopes that it would fix this by sending a valid code to the immobilizer every time but I'm unclear how the module behaves once a key is placed in the ignition. If, for example, a key is placed in the ignition but it couldn't read a transponder code from it would it cut the engine? Could you still drive the car? Would installing a bypass potientionally solve our issue? After installing an Evo-Key/Evo-One and it is properly set up with a transponder code from a valid key, does a proper transponder key need to be in the ignition to drive the car or would a key that is cut properly but maybe doesn't have the transponder work as well?

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