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The library interface supports compressed DATA. The library does not deflate nor inflate data payload. When sending data, an application has to compress data and set NGHTTP2_DATA_FLAG_COMPRESSED to data_flags parameter in nghttp2_data_source_read_callback. On receiving, flags parameter in nghttp2_on_data_chunk_recv_callback includes NGHTTP2_FLAG_COMPRESSED. An application should check the flags and inflate data as necessary. Since compression context is per frame, when DATA is seen in nghttp2_on_frame_recv_callback, an application should reset compression context.
See README.rst