- A blockchain’s ‘on-chain’ transactions provide more security and transparency because they are validated and stored on an immutable public distributed ledger.
- Off-chain transactions can function by utilizing a third-party or coupon-based intermediary by exchanging private keys to an existing wallet in place of transmitting money, or both.
Tokens that are entirely written on the blockchain and have all of their metadata and smart contracts saved there are referred to as on-chain NFTs. On the other side, off-chain NFTs store their media off-chain but their smart contracts on the blockchain.
Although on-chain NFTs are the popular choice in business, both technologies have advantages and disadvantages.
Introduction To On-Chain NFT Marketplaces
On-chain NFTs that are written on the blockchain are also stored there. Their data is then written to the mainnet (the main public Ethereum production blockchain) and kept there. It contains information such as metadata, smart contracts, and the hashtag for the created NFT.
Smart contracts are self-executing programs that take action when predetermined conditions are satisfied, such as when a specific payment has been received. They may produce on-chain NFTs and are a native part of the Ethereum network.
- Advantages
- Trustworthy Storage
The user’s metadata, smart contract, and NFT are all saved on the blockchain via on-chain NFTs. This implies that their NFT can exist independently of any external systems or third parties. Their NFT collection will always be accessible, as long as the blockchain is operating as it should.
- More Liquidity
Technically speaking, NFTs on the blockchain are more valuable. Since every on-chain token complies with Ethereum network standards, their liquidity is higher. For traders hoping to earn from NFT collections, investing in them is a preferable option because they can be moved quickly.
Introduction To Off-Chain NFT Marketplaces
Off-chain NFTs host their media off-chain but host their smart contracts on the blockchain. The information is instead kept on IPFS (interplanetary file system) nodes, Dropbox, Google Drive, and other cloud servers.
While some off-chain NFT initiatives employ commercial IPFS nodes like NFT Storage or Pinata, others run their own IPFS nodes. However, only smart contract data is needed every time a transaction takes place, not the data for the NFT medium, as it is off-chain. Storing NFTs off-chain can save on gas expenses during transactions.
- Advantages
- No prior blockchain experience is necessary
Investors with little or no blockchain experience can purchase off-chain NFTs. They can forego gas costs and complicated crypto-bidding systems by placing a bid for NFTs using fiat money. Investors don’t require a crypto wallet for their NFTs on off-chain platforms. For instance, Top Shot investors keep their moments in a Top Shot-managed custodial wallet.
- No fuel costs
The pain of gas fees is well-known to all NFT investors. They vary greatly from day to day, with some transactions costing over $100 in fees. Off-chain NFT transactions eliminate these costs, lowering the cost of purchasing and maintaining NFTs.
Conclusion
The preferable choice will depend on particular tastes, as both on-chain and off-chain NFTs have advantages and disadvantages. While on-chain NFTs are the simpler option for storage and trading, getting started requires knowledge of blockchain technology. On the other hand, although they don’t have the same level of security as their on-chain counterparts, off-chain NFTs are simpler for novice investors.
