Storing metadata on-chain is complex and can be costly. It’s also the purest form of NFT. With all data stored on the blockchain, there's no reliance on third parties, collectors gain total control and this opens a new world of possibility. That's why so many of the most valuable NFTs ever sold store their data on-chain.
#1 More flexibility
Off-chain NFTs are hindered by their inability to interact with smart contracts. Contracts can’t communicate with any external source so they’re essentially limited to transferring ownership rights between collectors. Not only does this imply a disconnect between the contract and the actual NFT, but it limits flexibility. Fully on-chain NFTs are easier to trade (trading can even be fully automated), easier to store and can include innovative features.
#2 Offers “true” ownership
Although NFTs imply digital ownership, most data is stored off-chain. Some utilize cloud storage, but the vast majority are now stored on IPFS (InterPlanetary File System). IPFS is more secure and decentralized than clouds, but there's still a separation. Should a disruption occur and the storage location becomes unavailable, all the data associated with the NFT vanishes. True, you’ll still have the blockchain record; but if it links to an unavailable file, then all is lost. On-chain data, however, confers full ownership to the collector.
#3 And true immutability
It’s a common adage that NFTs are eternal. Their immutability is an intrinsic part of their value, but an NFTs provenance is limited to its storage medium. Blockchain and smart contracts are designed to endure forever. Storing data on-chain not only guarantees an NFT of its immutability, but it vastly boosts its intrinsic value. Collectors pay for permanence, and as more people become aware of the limitations of off-chain metadata, the more they’ll demand an alternative.
NFTs with their data stored on-chain might be associated with a certain game mechanic linked to a trait. For example, Philip Creco, a vocal proponent of on-chain metadata and chief developer behind Crecoland, uses gaming mechanics to enhance user experience. Every Crecodile has a trait and any Crecodile carrying a pickaxe mines $DUST. Game mechanics like this are only the tip of the iceberg; but through the lens of gaming NFTS, on-chain metadata is primed to be a huge part of web3's future.