LZ78

LZ77 and LZ78 are the two lossless data compression algorithms published in papers by Abraham Lempel and Jacob Ziv in 1977 and 1978. They are also known as LZ1 and LZ2 respectively. These two algorithms form the basis for many variations including LZW, LZSS, LZMA and others. Besides their academic influence, these algorithms formed the basis of several ubiquitous compression schemes, including GIF and the DEFLATE algorithm used in PNG.

They are both theoretically dictionary coders. LZ77 maintains a sliding window during compression. This was later shown to be equivalent to the explicit dictionary constructed by LZ78—however, they are only equivalent when the entire data is intended to be decompressed. LZ78 decompression allows random access to the input as long as the entire dictionary is available, while LZ77 decompression must always start at the beginning of the input.

The algorithms were named an IEEE Milestone in 2004.

In the second of the two papers that introduced these algorithms they are analyzed as encoders defined by finite-state machines. A measure analogous to information entropy is developed for individual sequences (as opposed to probabilistic ensembles). This measure gives a bound on the data compression ratio that can be achieved. It is then shown that there exist finite lossless encoders for every sequence that achieve this bound as the length of the sequence grows to infinity. In this sense an algorithm based on this scheme produces asymptotically optimal encodings. This result can be proved more directly, as for example in notes by Peter Shor.

...
Wikipedia