Just to clear up some possible confusion here:-
Altitude used in SkyDemon is the GPS altitude, whether you are using Location Services or PilotAware.
This is all derived from the GPS/NMEA data.
Traffic data that is passed to SkyDemon (and others) contains relative height differences.
In the case of ADS-B, Mode-C and Mode-S traffic data, the relative height difference is calculated using Barometric Pressure.
In the case of Mode-C this is only accurate to the closest 100ft, I recall in Mode-S/ADS-B it can be a higher resolution of 25ft
The original discrepency (if correct) was a 400ft discrepancy - which is pretty large.
First thing to check is the reported QNH on the PilotAware homepage, this will report both the Pressure and the calculated
altitude, please ensure these reported values are correct, if they are, then the issue is either the other aircraft pressure sensor, or this was not the aircraft reported.
One final mention, is that there was a fix in SkyDemon (last 2 weeks) which resulted in miscalculations for Mode-C/S traffic due to a metres to ft conversion
Final word on this, PilotAware to PilotAware traffic uses GPS altitude comparison, which seems to be a more accurate and finer resolution than Barometric.
Thx
Lee