You should place it at the outlet of your canister. If you place it at your canister inlet. It will make your canister as CO2 reactor. The CO2 increase in your canister will kill all the bacteria.

Goto lfs and check out how they placing the diffusor or reactor. The picture you posted is the external CO2 reactor. Not diffusor. Diffusor is the one with ceremic inside the tank.

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