Version-based deduplication of incremental forever type backup

A system and method for improving deduplication techniques in a data storage system. In one embodiment, a data storage system is configured to divide first data into a first plurality of segments, to generate a first plurality of fingerprints that are each to be associated with a segment, to identify second data that is to be updated by the first data and a second plurality of fingerprints associated with the second data, to load the second data and the second plurality of fingerprints from persistent storage of the data storage system into working memory, to determine, in the working memory, that a first segment of the first plurality of segments updates the second data by comparing a first fingerprint associated with the first segment to the second plurality of fingerprints, and to overwrite a second segment of the second data with the first segment in response to the determination.