Storing sensitive information off-chain in secure and privacy-preserving systems, while referencing the data on-chain through hashes or identifiers, is a widely adopted best practice in blockchain technology. This approach addresses blockchain’s limitations in handling large data volumes and its inherent transparency, which can pose privacy risks. By keeping sensitive data off-chain, organizations can leverage traditional data storage solutions that offer robust security measures, such as encryption and access controls. The blockchain ledger then maintains references to this off-chain data using cryptographic hashes or unique identifiers, ensuring data integrity and authenticity without exposing the actual content. For instance, Goint et al. (2023) proposed a mechanism where data is encrypted and stored off-chain, with the encryption keys securely anchored on-chain, allowing authorized access while preserving privacy. Similarly, a study by Puneetha and Tanuja (2023) evaluated the performance of off-chain storage systems like the InterPlanetary File System (IPFS) in blockchain applications, highlighting their effectiveness in securely managing sensitive data. This hybrid storage strategy not only enhances scalability and performance but also ensures compliance with data protection regulations by minimizing the exposure of sensitive information on the blockchain.
