Meaning
Method of holding large datasets or private documents outside of a public ledger while maintaining a link to it via hashes or references. This approach allows for the management of sensitive information that would be too expensive or public to keep on a blockchain. Off chain storage ensures that the evidence of a transaction remains accessible even when the ledger only holds a summary.
Cost Efficiency
Saving significant amounts of data directly on a distributed network is prohibitively expensive.
Confidentiality Protection
Private records must often remain hidden from the public eye to protect business interests. Using off chain storage allows the company to share the underlying documents only with authorized parties while anyone can verify the hash on the ledger. This mechanism preserves the privacy of the participants while maintaining the integrity of the record.
Retrieval Risk
Availability of the data depends on the health of the external hosting system. If the off chain storage fails or the files are deleted, the hash on the ledger becomes a pointer to nothing. Founders must implement redundant backups to ensure that their digital proof survives for the required duration.
Loss of these external files renders the ledger proof useless in a dispute.
