Web3 executives are urging creators to carefully consider where they should store their nonfungible tokens (NFTs) – whether on-chain or off-chain – as each option presents its own advantages and disadvantages.
In 2022, NFTs were typically not stored directly on the blockchain. Instead, NFTs on the blockchain pointed to external data storage locations. However, this approach was flawed, as highlighted during the FTX bankruptcy saga when NFTs hosted on FTX displayed blank images instead of the original artworks. Jana Bertram, the head of strategy at Rari Foundation, explained the issue with this type of storage.
However, the introduction of Bitcoin Ordinals changed the game. Ordinals allow for on-chain storage of NFT data, introducing a new set of trade-offs. While storing NFTs on the Bitcoin blockchain provides permanence, it has also sparked a debate on whether NFTs should reside within the Bitcoin network. Some argue that Ordinals are congesting the Bitcoin network, while others advocate for NFTs to remain on Bitcoin.
Given the various storage options available, Web3 creators must now make a decision on where to store their NFTs. To help with this decision, professionals in the NFT space have provided guidance on how creators can determine the appropriate storage location.
Witek Radomski, the co-founder and chief technology officer of Atlas Development (Enjin), explained that off-chain storage is the most cost-effective option for handling large amounts of data. On the other hand, on-chain storage offers a “permanent, tamper-proof vault” for NFTs. Radomski also highlighted the hybrid option of using Filecoin and the InterPlanetary File System (IPFS), which provides decentralized storage with lower costs compared to Bitcoin.
Meanwhile, Jana Bertram emphasized that the decision to store an NFT on or off-chain depends on its intended purpose. She advised projects to carefully consider the trade-off between security and scalability, evaluating the specific use case of the NFTs before deciding where to store them.