We've been following what amounts to a breaking change in OneDrive, when over the 4th of July holiday weekend Microsoft suddenly required that any drives hosting OneDrive folders be formatted using the NTFS filesystem. Microsoft, in a statement to us, confirmed that NTFS is now required, but somewhat inexplicably insisted that "nothing had changed," and that NTFS has always been the only supported file system protocol (although up until now ExFAT and ReFS have been working just fine).
Robert Freudenreich, the founder and CTO of Boxcryptor, was kind enough to email us after he saw the posts, with an explanation as to why Microsoft suddenly decided to enforce NTFS.
Freudenreich first pointed to the earlier implementation of OneDrive placeholders, and noted that they worked as an extension to Windows Explorer, and were not accessible via the Win32 API, meaning for example that 3rd party developers couldn't make use of the feature.
He goes on to tell us:
In contrast to the first implementation, Microsoft integrated it not just in Windows Explorer, but deeply within the Windows kernel so that all applications can download online-only files, e.g. via the regular Win32 file API. For this deep integration, Microsoft is using a NTFS feature called “Reparse Points” which provides the necessary functionality to have some sort of “placeholders” in the filesystem which can retrieve its actual content on-demand when an application tries to open the “file”.
We had suspected that OneDrive On-Demand might be the cause of the change, and it looks like that might be the case. Certainly users would be upset if the new On-Demand feature didn't work on their systems, although it's unclear why this couldn't be communicated. We've reached out to Microsoft for further clarification, and will keep you posted on anything we hear.
Commenters on our original post have been pointing out that SD cards come formatted with ExFAT, and there have been problems using them formatted as NTFS, so what this means about continued use of SD cards (such as in a Surface device where SSD storage is at a premium) is also unclear.
By the way, thanks to Robert Freudenreich for reaching out to us! His company, Boxcryptor, provides encryption services for Dropbox, Box, and OneDrive, among many others.