A method of similarity-based deduplication comprising the steps of: receiving an input data block; computing discrete wavelet transform (DWT) coefficients; extracting feature-related DWT data from the computed DWT coefficients; applying quantization to the extracted feature-related DWT data to obtain keys as results of the quantization; constructing a locality-sensitive fingerprint of the input data block; computing a similarity degree between the locality-sensitive fingerprint of the input data block and a locality-sensitive fingerprint of each data block in the plurality of the data blocks in a cache memory; selecting an optimal reference data block as the data block; determining a differential compression is required to be applied based on the similarity degree between the input data block and the optimal reference data block; applying the differential compression to the input data block and the optimal reference data block.