The document discusses the design and implementation of an improved LZW data compression algorithm utilizing a dictionary based on content addressable memory. The proposed method achieves a reduction in storage space by 60.25% and increases the compression rate by 30.3%, utilizing a 5-bit code instead of the standard 7-bit ASCII representation. The results, obtained using Xilinx tools, demonstrate the effectiveness of the finite state machine approach in enhancing the algorithm's performance.