A chain code is a lossless compression based image segmentation method for binary images based upon tracing image contours. The basic principle of chain coding, like other contour codings, is to separately encode each connected component, or "blob", in the image.
For each such region, a point on the boundary is selected and its coordinates are transmitted. The encoder then moves along the boundary of the region and, at each step, transmits a symbol representing the direction of this movement.
This continues until the encoder returns to the starting position, at which point the blob has been completely described, and encoding continues with the next blob in the image.
This encoding method is particularly effective for images consisting of a reasonably small number of large connected components.