NFT Storage Dilemma: On-Chain or Off-Chain Trade-Offs

Web3 executives have asked producers to evaluate which sorts of nonfungible tokens (NFTs) should exist in the blockchain and which should reside outside the chain.

This is because on-chain and off-chain storage of NFTs each have their own set of advantages and disadvantages. In 2022, NFTs were not stored on the blockchain.

At that time, it was common practice for non-fungible tokens (NFTs) on the blockchain to point to a data storage place that was located outside of the chain. Jana Bertram, the head of strategy at Rari Foundation, brought the issue caused by this particular kind of non-fungible token storage to light at an early stage in the FTX bankruptcy drama.

“Off-chain storage relies on the network’s accessibility and the storage layer availability. This implies that the security of the NFT is susceptible to more potential compromises, affecting its permanence.”

During that period, non-fungible tokens (NFTs) housed on FTX experienced a malfunction, resulting in the display of blank images rather than the original artwork. Nevertheless, the introduction of Bitcoin Ordinals brought about a change in the game, as Bertram described.

Keeping NFT data on the blockchain is made possible by ordinals, resulting in a new set of trade-offs. NFTs that were based on Bitcoin were able to reside on the blockchain, which provided them with benefits such as permanence.

However, this also sparked a debate about whether NFTs should be integrated into the Bitcoin network. There is a faction that supports the continued existence of non-fungible tokens (NFTs) in Bitcoin, but there are others who continue to contend that Ordinals are causing the Bitcoin network to become slower.

Web3 developers must decide where to store their NFTs from a variety of accessible storage choices. The professionals working in the NFT field described how creators might determine where to store NFTs, even though this could be a tricky situation to deal with.

In an interview, Witek Radomski, the co-founder and chief technical officer of Atlas Development (Enjin), stated that off-chain storage is the most cost-effective method for managing large amounts of data.

In contrast, on-chain storage has the potential to function similarly to a “permanent, tamper-proof vault.” In addition, Radomski stated:

“I think creators should decide what deserves the vault treatment and what can live in the cloud.”

In addition to this, Radomski said that a hybrid solution, such as Filecoin and the InterPlanetary File System (IPFS), offers a decentralized storage alternative.

The CEO who made the statement clarified that these solutions are specifically designed for storage, unlike Bitcoin. In his explanation, he stated that storing photos on IPFS still provides you with the advantages of decentralization, but at significantly reduced prices.

Meanwhile, Bertram said that the purpose of an NFT should determine its inclusion on or exclusion from the blockchain.

According to Bertram, the CEO emphasized that projects should carefully evaluate the individual use cases of NFTs before determining where to store the assets.

“For instance, an NFT representing a house title may warrant on-chain storage, whereas an NFT for a brand loyalty membership may find ample sufficiency in an off-chain existence.”

This is because projects should manage the trade-off between security and scalability.