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It was shown recently that Sparse Ternary Codes (STC) posses superior ``coding gain'' compared to the classical binary hashing framework and can successfully be used for large-scale search applications. This work extends the STC for compression and proposes a rate-distortion efficient design. We first study a single-layer setup where we show that binary encoding intrinsically suffers from poor compression quality while STC, thanks to the flexibility in design, can have near-optimal rate allocation. We further show that single-layer codes should be limited to very low rates.