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Thank you for the explanation!
Unfortunately, it seems, if I understand understand correcly, that this is not sustainable in the long term for small instances/servers. If Lemmy continues to grow in popularity, then the influx of content will continue to increase, thereby pushing small servers out of participation due to lack of resources. The data storage requirements, I fear, will become a very limiting issue.
I feel that if servers only tracked what their users directly participated in (i.e. only save comments, and posts directly made by the user), this issue would not be as problematic.
For example, I would like to host my own instance with only my account on it. I was initially hoping that my data storage requirements would only be directly proportional to how much I, as a user, use Lemmy; the server would only need to store my personally created data, and nothing else. Unfortunately, however, it appears that I would also have to have enough resources to sustain everyone elses posts which is a far steeper requirement.
Media takes up space. The text from posts and comments is trivial. The database for lemmy.world is only 25 GB. Wikipedia text is only 21 GB.
It's not quite as bad, because you're still being pushed what you subscribe to. So while you do indeed get a fair bit of content you might never see, it's necessary for you to be able to browse those communities and even being able to compute what threads are active/trending/hot/updated or whatever else filter you use. Because that's all computed locally on your instance.
It's also an efficiency advantage: if your instance has a lot of users, having everything locally means that you offer a much smoother experience, and also you're contributing to the remote instance not being so busy with traffic as you're not just proxying everything to it and increasing the remote's load.
For your storage concerns, there's nothing preventing you from purging content older than a week or two regularly via a cronjob.
It's not that bad so far:
Your instance must be very new, very few users, very inactive... or all of the above. I stood up aussie.zone just under a month ago, Postgres DB is currently 9.6GB.