When attaching a file to a card does it stay in it's original location and is saved in it's original location when edited - or once attached does it live within Trello?
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TLDR: it is a copy
When you "attach" a file to a remote service like Trello, what you're doing is handing it a copy of the file you tell the upload process to use.
Imagine the old-school way of doing it - your solicitor asks for a copy of a doc, you photocopy it, and give the copy to them. Those two bits of paper say the same thing, but if your cat chews your copy, that will not affect the solicitors copy.
You've got two independent copies of the same thing if you attach a file.
I tend to delete the local copy. I have no idea when my disk might fail and lose the file, so an upload is a bit more safe.
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