Not my area of expertise, but in principle any set of instructions can be encoded into a prefix-free code (e.g. a binary argument just expands the set of instru

Not my area of expertise, but in principle any set of instructions can be encoded into a prefix-free code (e.g. a binary argument just expands the set of instructions by a factor of 2). If both arguments have equal probabilities this simplifies to simply appending the argument as a prefix. If the probabilities are unequal, you can save bits (entropy) by bundling frequently occurring arguments together in the Huffman scheme, at the cost of increased decoding complexity. I heard bandwidth/cache sizes is a much greater problem than circuit area though. You are right that you need to parse all previous instructions to get an offset. Again, this is far from my area of expertise (first time I read about CPU design), but it seems this problem could easily be alleviated by slight modifications to Huffman codes, for example by setting "blocks" of instructions of certain sizes and assigning a prefix to each block containing the number of instructions in each -- you then can get offsets very quickly.