Can we build a performant distributed system that will be able to hold and relay petabytes of that data? That remains to be seen.

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Backblaze B2 will store a petabyte for $72k/yr

The relays don't need to store the same data set. Nostr isn't a blockchain.

If they don't then it's not distributed enough and the data is easily censored.

Disagree. I don't need every event on every relay to be resilient.