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Among all algorithms based on wavelet transform and zerotree quantization, Said and Pearlman's (1996) set partitioning in hierarchical trees (SPIHT) algorithm is well-known for its simplicity and efficiency. This paper deals with the real-time implementation of SPIHT algorithm using DSP chip. In order to facilitate the implementation and improve the codec's performance, some relative issues are thoroughly discussed, such as the optimization of program structure to speed up the wavelet decomposition. SPIHT's high memory requirement is a major drawback for hardware implementation. In this paper, we modify the original SPIHT algorithm by presenting two new concepts-number of error bits and absolute zerotree. Consequently, the memory cost is significantly reduced. We also introduce a new method to control the coding process by number of error bits. Our experimental results show that the implementation meets common requirement of real-time video coding and is proven to be a practical and efficient DSP solution.