Non-fungible tokens (NFTs) are, ultimately, a form of digital media. And just like other digital media—from the words written in Decrypt articles to YouTube videos and streamed music—NFTs, in their most basic form, consist of data made up of 1s and 0s.
That’s important because everything associated with the NFT—from the smart contract it lives in to the URL you use to view it to the image itself—ultimately boils down to 1s and 0s that are stored on a computer.
Not all NFT storage techniques are created equal, however. Indeed, some NFT holders may not own much more than a URL or token ID. So it's worth taking the time to understand how NFT storage works before you think about buying or making an NFT.
Before we dive in let's take a look at some core concepts:
Storing an NFT on-chain means that the entire NFT—the image and all its metadata—exist on a blockchain. Conversely, off-chain stored NFTs means that some or most of the NFT is stored outside of the blockchain.
On-chain storage can be preferable because it means that users can verify all facets of the NFT. However, very few NFT projects opt for this method of storage.
An example of one that does is Autoglyphs. The reason for this is simple—JPEG images contain a lot of data, especially when those images exist in collections on the order of thousands or tens of thousands.
As a result, most NFT projects opt to store the actual images off chain. Many well known NFT projects like CryptoPunks and Bored Ape Yacht Club opt for off-chain storage.
In the case of off-chain storage, the NFT's smart contract contains information that points to some off-chain location where the actual NFT JPEG image is stored. Often, the NFT image and its metadata are stored in a hash.
This hash is used to point to either a centralized or decentralized hosting provider.
Examples of centralized hosting providers include Amazon and Google. Centralized hosting providers run servers that store the 1s and 0s that make up the NFT.
The risk of centralized hosting providers is that (although unlikely) they could shut down at any time and the owner’s NFT would be lost. All the owner would be left with is, in some cases, as a simple hash that exists in a smart contract.
That is why many projects opt to use decentralized solutions to host their NFTs. The most common solution is to host NFT data on the InterPlanetary File System (IPFS). IPFS is a distributed peer-to-peer network on which files are stored across multiple nodes, making them resistant to single points of failure such as server issues.
While NFTs stored on IPFS are not technically stored on-chain, they are theoretically safer because IPFS is censorship-resistant; no single entity has the power to shut it down.
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