Inference of demographic and evolutionary parameters from a sample of genome sequences often proceeds by first inferring identical-by-descent (IBD) genome segments. By exploiting efficient data encoding based on the ancestral recombination graph (ARG), we obtain three major advantages over current approaches: (i) no need to impose a length threshold on IBD segments, (ii) IBD can be defined without the hard-to-verify requirement of no recombination, and (iii) computation time can be reduced with little loss of statistical efficiency using only the IBD segments from a set of sequence pairs that scales linearly with sample size. We first demonstrate powerful inferences when true IBD information is available from simulated data. For IBD inferred from real data, we propose an approximate Bayesian computation inference algorithm and use it to show that poorly-inferred short IBD segments can improve estimation precision. We show estimation precision similar to a previously-published estimator despite a 4 000-fold reduction in data used for inference. Computational cost limits model complexity in our approach, but we are able to incorporate unknown nuisance parameters and model misspecification, still finding improved parameter inference.