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Using Kafka I understand that it makes little sense to simply pass events in and out of a Kafka cluster, and that the real benefit comes when doing some processing in the events received in the cluster. So there is processing that can be done in the cluster itself.

Using Kafka Streams we can do some processing too, but this time it is done in the client application itself, not in the cluster.

So what sort of processing should be done in the cluster and what sort in the client application ?

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"there is processing that can be done in the cluster itself." - Kafka does not process messages inside itself, ksqlDB is allowing doing processing inside its workers , as well as Kafka Connect, It is true that Kafka Streams is doing the process in the application code , it reads from one or more topics and allows you to manipulate/transform and work with the data and writing the output to output topic , in the front you'll have another application that consumes from that "output" topic

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