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Is this similar to how Napster worked?
Yes in the sense that users pool resources for the network, but no in the sense that Napster relied on a centralized database of content - whereas Freenet is entirely decentralized.

Also Freenet is much more general, you could think of Napster like a shared hard drive, whereas Freenet is like a shared computer capable of running decentralized applications like group chat, social networks, search engines, etc.

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I thought Gnutella was a bit more like Freenet than Napster, iirc only the bootstrap was centralized.
Gnutella was decentralized like Freenet, but it's broadcast search approach limited scalability relative to Freenet's "small-world" approach which can scale indefinitely.