Centralized vs. Decentralized NFT Metadata

Last updated:
May 17, 2022

NFTs (Non-Fungible Tokens) are traditionally seen as unique and unchangeable digital assets.

Colony redefines that narrative as one of the first generative NFT projects on Ethereum to update its avatars from their original 2D pixelated images to higher-resolution 3D renders.

Typically, NFTs are considered a digital asset class where their owners have some or all the rights to these assets and all their properties. But where are these properties located? The properties or traits associated with that image come from its Metadata. Metadata is the DNA that makes an NFT have its unique nature.

There is a common term in the NFT community once a project is about to be revealed, and that is to “refresh the metadata”. This allows the placeholder on the NFT to be replaced with the exact information that gives it a unique nature. The data that is stored in the NFT’s Metadata is: the image link, its properties, and even its token number. The action of refreshing the metadata essentially allows for the image and traits on that NFT to reflect what is being currently stored on API or IPFS. When the metadata is stored centrally on an API, it means that the developers behind a project can add, remove, and update properties within the NFTs as the project develops.

There are two ways to store NFT metadata:

The first is decentralized, much like a blockchain where the information is immutable. The second is in a centralized location, much like a server where admins have complete control of the data and can update or change it at will.

Why is this important for NFTs? There are many arguments for the pros and cons of how Metadata should be stored. Decentralized Metadata has the highest levels of security because there is no way to access the information. Utilizing decentralized Metadata is currently the most common practice in the NFT space. The data is on a decentralized, immutable network(unchangeable) and frozen in place. Its frozen nature denies the creator the ability to improve their network or their art. NFT’s with centralized metadata have benefits that could outweigh their risks.

Security is a high concern when information is stored in a centralized location.

Maintaining high levels of security provides many benefits for centralized metadata. Containing all that information in one location allows the creators of the project to advance the design as the project evolves and grows. Centralized metadata also allows users to interact with the contract in a unique way enabling evolution and customization of their NFT. Innovating the utility of centralized metadata can take the project in new directions far ahead of its current trajectory.

Colony and its flagship NFT collection of 25,000 Colonists will be one of the first projects on L1 Ethereum to require centralized Metadata. The project requires centralized metadata because they are updating their NFT’s images from the original pixelated 2D versions to high-resolution 3D renders. Additionally, it allows for users to upgrade their Colonist NFTs by purchasing cosmetic items in a soon-to-be-released item shop feature on their website. The utility behind these changes is more in-line with the current direction of the project and shows a use case where having the metadata on a centralized server allows for a forward evolution of the project's utility.

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