We use S3-compatible storage bucket, the same as what they use for Steem and Hive.

We had plans to switch over to uploading on IPFS as some point, but we never went through with it.

As @tekraze said in his comment, IPFS is slow and unreliable. We would have to run IPFS nodes as well, which would cost a lot more than using an S3-compatible storage bucket.