A simple form of data compression replaces each instance of a commonly appearing pair of consecutive characters with a single character that does not appear in the original data.

For example, the string "THIS$\_$IS$\_$THE$\_$BEST$\_$THING$\_$ABOUT$\_$THE FIRST$\_$IS$!$ can be encoded as $"\%$#$\%$ING$\_$ABOUT$\_\%$E$\_$FIRST by replacing all instances of $"$TH$"$ with $"\%"$ and replacing all instances of $"$IS$"$ with $"$#$".$

Which of the following statements about this compression technique is true?

This type of compression is an example of a lossy transformation because some pairs of characters are replaced by a single character.

This type of compression is an example of a lossy transformation because it discards some of the original data.

This type of compression is an example of a lossless transformation because encoded data can be restored to its original state.

This type of compression is an example of alossless transformation because it can be