I assume blocking is supported by the server so it should be more optimized / faster. Filtering is a client-side feature.
This is what I assume as well. I think filtering was added in Sync before blocking was fully implemented by Lemmy
My understanding:
Blocking a community will stop you from seeing all posts from said community.
Blocking a user will stop you from seeing posts and comments from said user.
Filters will stop you from seeing posts with specific keywords. For example, filtering "Trump" should stop you from seeing posts with trump in the title. But you'd still see other posts from a community, like politics.
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