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A new technique for image compression called Block Truncation Coding (BTC) is presented and compared with transform and other techniques. The BTC algorithm uses a two-level (one-bit) nonparametric quantizer that adapts to local properties of the image. The quantizer that shows great promise is one which preserves the local sample moments. This quantizer produces good quality images that appear to be enhanced at data rates of 1.5 bits/picture element. No large data storage is required, and the computation is small. The quantizer is compared with standard (minimum mean-square error and mean absolute error) one-bit quantizers. Modifications of the basic BTC algorithm are discussed along with the performance of BTC in the presence of channel errors.