When buying an NFT it is always important to take a look at where the artwork is stored. Although many traders tend to assume that the NFT is the artwork, there is actually a clear distinction between a token’s metadata and the imagery itself. One of the most common storage places for NFT artwork is the Interplanetary File Storage (IPFS). 

What is IPFS?

IPFS is a decentralized protocol that was launched in 2015 to act as a file storage place without relying on centralized servers to host all data. It acts similarly to blockchains because of how the protocol uses a web of nodes to remain functional. 

Images stored on IPFS are uploaded and then that data is broadcasted to other nodes using hashing technology. Once an image is uploaded to IPFS, it is impossible to take that image off of the platform because of its decentralized manner. This makes it ideal for NFT artwork that requires an off-chain storage location. 

Image Hosting vs On-Chain

Typically, the image location of an NFT can have a major impact on the value of a collection because it tends to affect what the token holder owns. In many cases, an NFT’s metadata only stores a list of traits and a link to the storage location on IPFS.

Value

When the artwork for an NFT is uploaded to IPFS, it translates onto the token as a link because uploading an image directly on-chain requires a larger amount of data to be uploaded which becomes more expensive. 

For the sake of convenience, the majority of NFT artwork is generally stored on IPFS due to cost efficiency. However, this opens up a lot of debate about what holders truly own because many will argue that it is the metadata being owned and not the artwork itself; ergo, holders have only bought a link. 

Permanence 

Additionally, many NFT collectors feel that owning a link to an image (instead of the image itself) creates an additional problem - link rot. This is a term used when a link becomes old, broken, and unusable. 

Link rot has the potential to become a risk to token holders because it affects the longevity of the token. While the blockchain is a permanent ledger, a link within a token’s metadata has the ability to shut down and cause the artwork to be lost forever. While this isn’t something that is a major risk, it is one of the driving forces behind collections with high value such as Cryptopunks and Art Blocks which store their artwork directly on-chain. 

Why do NFTs use IPFS?

Despite the high value of on-chain artwork, IPFS still serves a critical role in the NFT ecosystem because of its decentralized nature and its ability to store images efficiently. There are still many high-profile projects such as the Bored Ape Yacht Club and Doodles that use the protocol because of its reliability and ease of use. 

In fact, without IPFS, the entire NFT ecosystem would look completely different. The protocol serves a purpose and is incredibly useful for teams that are looking to start their first NFT project. Services like Pinata allow teams to upload their NFT artwork for a fraction of the cost which allows new NFT concepts to be tried with little risk to a team’s initial treasury. As the NFT Ecosystem grows, expect IPFS to continue being an integral aspect of web3.