A method dramatically reduces the amount of data to be stored and transferred in a networked storage system. Preferably, the network storage system provides continued data protection through mirroring/replication, disk-to-disk backup, data archiving for future retrieval, and Information Lifecycle management (ILM). The idea is to leverage the parity computation that exists in RAID systems. By caching, transferring, and storing data parity or delta bytes of changes on a block as opposed to data block itself, substantial data reduction is possible without using sophisticated compression algorithms at the production side to minimize performance impacts upon production servers. Data can be computed using the parity/delta and previously existing data at mirror side, replication side, backup storage, or at retrieval time upon events such as failures or ILM operations.