Abstract
In-context learning has established itself as an important learning paradigm for Large Language Models (LLMs). In this paper, we demonstrate that LLMs can learn encoding keys in-context and perform analysis directly on encoded representations. This finding enables lossless prompt compression via dictionary encoding without model fine-tuning: frequently occurring subsequences are replaced with compact meta-tokens, and when provided with the compression dictionary in the system prompt, LLMs correctly interpret these meta-tokens during analysis, producing outputs equivalent to those from uncompressed inputs. We present a compression algorithm that identifies repetitive patterns at multiple length scales, incorporating a token-savings optimization criterion that ensures compression reduces costs by preventing dictionary overhead from exceeding savings. The algorithm achieves compression ratios up to 80 depending on dataset characteristics. To validate that LLM analytical accuracy is preserved under compression, we use decompression as a proxy task with unambiguous ground truth. Evaluation on the LogHub 2.0 benchmark using Claude 3.7 Sonnet demonstrates exact match rates exceeding 0.99 for template-based compression and average Levenshtein similarity scores above 0.91 for algorithmic compression, even at compression ratios of 60-80. Additionally, compression ratio explains less than 2 of variance in similarity metrics, indicating that decompression quality depends on dataset characteristics rather than compression intensity. This training-free approach works with API-based LLMs, directly addressing fundamental deployment constraints -- token limits and API costs -- and enabling cost-effective analysis of large-scale repetitive datasets, even as data patterns evolve over time.