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Is a first-party IPFS Web Extension a possibility? Like how it would have been with the old-style Firefox extensions?

It's not a standard yet, but you can try it out in Firefox Nightly. https://github.com/mozilla/libdweb/blob/master/Readme.md#pro...

These libdweb Browser Extension APIs never landed in any official Firefox Nightly build. Mozilla stopped working on libdweb in 2019 (https://github.com/ipfs/ipfs-companion/pull/533#issuecomment...).

Ah dang. I figured it was popular enough that someone would be working on it at least experimentally.

Seems like its necessary to get the p2p stuff working properly other wise it all just uses a gateway.