[betaby]

If one stores a whole versions of the files that defeats the idea of git, and would consume too much space. I suppose I don't even need zstd if I have ZFS with compression, although compression levels won't be as good.

[tln]

You're relying on compression either way... my hunch is that controlling the compression yourself may get you a better result.

Git does not store diffs, it stores every version. These get compressed into packfiles https://git-scm.com/book/en/v2/Git-Internals-Packfiles. It looks like it uses zlib.