zip2zip++: Towards Inference-Time Token Compression with Minimal Quality Loss

Saibo Geng, Andrea Gentilini, Xinxian Ma, Nathan Ranchin, Yunzhen Yao +1

Dynamic vocabularies built on-the-fly via Lempel-Ziv-Welch (LZW) compression let a language model represent the same text in fewer tokens, but prior work shows that this efficiency comes at a cost to reasoning and perplexity. We show that this quality gap is not a fundamental price of compression but can be substantially closed through targeted improvements to the compression layer and LZW codec, without modifying the underlying pretrained language model. Our analysis reveals four key issues: (1) LZW's compression algorithm creates an implicit conflict between the input embedding and the output embedding, a tension that a single shared embedding cannot resolve; (2) naively applying RoPE to LZW-compressed sequences ignores that merged tokens can span multiple tokens; (3) merging certain tokens (notably digits) disproportionately hurts downstream accuracy; and (4) dynamic vocabularies introduce an inherent segmentation ambiguity that confounds standard evaluation. We address these through decoupled input/output dynamic embedding layer, size-aware RoPE positioning, and a modified LZW codec supporting selective merges and multi-view segmentations. Across four models, our recipe…