This doesnt really scale all that well because every relay would be sent every event. Should they store and relay them all? Relays shouldn't be expected to store the entire state of the network.

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I like the custom-broadcasting model, where you can set your broadcasting target-relays in the relay. Then you create little clusters of relays, that talk to each other, and everyone just needs one and a backup.

I kinda feel like this is being pushed too much on the user, through the client relay settings, but it's too advanced for them. They should just say, "these two relays and broadcasting from the first one", with broadcasting=TRUE as the default.

Maybe clients can suggest relays based on follow clusters? Perhaps they will lead to centralisation.

We aren't surprised that most blockchain nodes do the same, are we?

Except Mina, but even it supports so-called "archive nodes".

Yes, they should.

A block chain node needs the entire state to be useful. Nostr clients just need 99% of the very small part of the network the user is interested in.