NRZ vs PAM4: The Signal Change Behind Higher Speeds

When network speeds move from 100G to 400G and 800G, the change is not simply about increasing the number printed on an optical transceiver.

The way data is represented and transmitted has changed too.

One of the most important changes is the move from NRZ (Non-Return-to-Zero) signaling toward PAM4 (4-level Pulse Amplitude Modulation) in many high-speed Ethernet applications.

If you work with optical transceivers, switches, NICs or data center networks, you will likely come across both terms.

But what is the actual difference between NRZ and PAM4?

And why does PAM4 matter so much for high-speed optical networking?

Let's take a practical look.

What Is NRZ?

NRZ, or Non-Return-to-Zero, is a two-level signaling method.

In a basic NRZ system, the signal uses two amplitude levels to represent binary information:

• One level represents 0

• One level represents 1

Therefore, one NRZ symbol carries one bit of information.

This relatively simple signaling approach has been widely used in optical and electrical communication systems for many years.

One of its main advantages is that the receiver only needs to distinguish between two signal levels. This provides a relatively large eye opening and makes the signal easier to detect compared with multi-level signaling.

The challenge comes when the required data rate continues to increase.

What Is PAM4?

PAM4 stands for Pulse Amplitude Modulation with 4 levels.

Instead of two signal levels, PAM4 uses four amplitude levels.

Because there are four possible levels, each PAM4 symbol can represent 2 bits of information.

For example:

00 → Level 0
01 → Level 1
11 → Level 2
10 → Level 3

The exact coding and implementation depend on the system, but the key idea is simple:

NRZ carries 1 bit per symbol, while PAM4 carries 2 bits per symbol.

This makes PAM4 twice as efficient in terms of bits per symbol. ITU-T describes PAM4 as having four amplitude levels and carrying two bits per symbol, meaning its symbol rate can be half the bit rate compared with NRZ for the same binary data rate.

NRZ vs PAM4: What's the Main Difference?

The easiest way to understand the difference is to look at the number of signal levels.

PAM4 effectively puts more information into each symbol.

That is the key reason it became attractive as Ethernet speeds increased.

Why Did the Industry Move From NRZ to PAM4?

The answer comes down to bandwidth and signaling rate.

If a system uses NRZ, increasing the data rate generally requires increasing the symbol rate.

At some point, the electrical and optical channels become increasingly difficult to handle.

Higher signaling rates can introduce challenges such as:

• Higher channel loss

• Inter-symbol interference (ISI)

• Crosstalk

• Reflections

• Limited electrical bandwidth

• Greater signal-integrity requirements

• Increased power and design complexity

PAM4 offers another approach.

Because each symbol carries two bits, the system can achieve a higher bit rate without increasing the symbol rate by the same factor.

For example, a simplified comparison is:

28 GBd NRZ → approximately 28 Gb/s

while:

28 GBd PAM4 → approximately 56 Gb/s

The actual Ethernet implementation involves encoding, overhead and other system details, but the basic principle remains the same.

This bandwidth efficiency is one of the major reasons PAM4 became important for high-speed Ethernet.

The Trade-Off: PAM4 Is More Efficient, But More Sensitive

PAM4 solves one problem, but it introduces another.

NRZ has two signal levels.

PAM4 has four levels within a similar overall signal range.

That means the distance between adjacent PAM4 levels is smaller.

As a result, PAM4 generally has less vertical signal margin than NRZ and is more sensitive to noise and distortion.

This is why PAM4 systems require more sophisticated signal processing and careful channel design.

In practical terms:

NRZ

Two levels → larger eye opening → simpler detection

PAM4

Four levels → smaller eye openings → more demanding signal processing

This trade-off is fundamental to understanding why high-speed optical transceivers are more complex than their lower-speed predecessors.

IEEE technical work on 400G also documents the use of PAM4 as an approach for increasing per-lane data rates while addressing channel limitations.

PAM4 and 400G Optical Transceivers

This is where the difference becomes particularly relevant to optical transceivers.

Modern 400G solutions can use multiple high-speed lanes, and PAM4 enables higher data rates per lane than traditional NRZ signaling.

For example, many 400G optical implementations use 100G-class PAM4 lanes.

This allows a 400G interface to be built around multiple high-speed lanes rather than requiring one extremely high-speed signaling channel.

Different 400G transceiver types can use different optical architectures, wavelengths and lane configurations.

Examples include:

• 400G QSFP-DD SR8

• 400G QSFP-DD DR4

• 400G QSFP-DD FR4

• 400G QSFP-DD LR4

• 400G QSFP-DD FR8

The exact signaling and lane architecture should always be checked against the relevant Ethernet standard and module specification.

What About 800G Optical Transceivers?

The same principle becomes even more important as network speeds move toward 800G.

Higher aggregate bandwidth requires higher per-lane data rates, more lanes, or a combination of both.

PAM4 provides a practical way to increase the amount of information carried by each symbol.

This is one reason PAM4 is closely associated with today's high-speed data center ecosystem.

However, it is important not to assume that every 800G optical transceiver has exactly the same signaling architecture.

When comparing 800G modules, check:

• Host electrical interface

• Lane configuration

• Optical lane configuration

• Modulation format

• Ethernet standard

• Fiber type

• Transmission distance

• FEC requirements

• Power consumption

The transceiver's headline speed is only one part of the specification.

Does PAM4 Automatically Mean Better Performance?

No.

PAM4 is a signaling technology, not a performance rating.

A PAM4 optical transceiver is not automatically better simply because it uses PAM4.

The right question is:

Is the transceiver designed for the network architecture and application you are deploying?

For example, when selecting a 400G optical transceiver, you may need to consider:

• Switch compatibility

• NIC compatibility

• QSFP-DD or OSFP form factor

• Transmission distance

• SMF or MMF

• Connector type

• Wavelength

• Link budget

• FEC requirements

• Power consumption

• Operating temperature

• DOM/DDM support

A module with the correct speed but the wrong host interface or optical specification can still fail to work as expected.

Does PAM4 Require FEC?

This is another common question.

PAM4 systems generally have tighter signal margins than two-level NRZ systems, so error-management techniques become increasingly important in high-speed links.

FEC (Forward Error Correction) is used in many high-speed Ethernet implementations to help improve link reliability.

However, it is better not to say that "PAM4 always requires FEC."

The actual FEC requirement depends on the specific Ethernet PHY, interface, standard and platform implementation.

So when selecting a PAM4 optical transceiver, don't rely on a general rule.

Check the specifications of the switch, NIC and optical interface involved in the deployment.

For more information, see our previous guide:

Optical Knowledge Series #05 — FEC: The Technology Helping High-Speed Links Stay Reliable

Can an NRZ Module Be Replaced by a PAM4 Module?

Not necessarily.

This is one of the most important practical points for buyers.

Two modules may have a similar form factor and connector but use different signaling technologies or host interfaces.

Before replacing an NRZ-based optic with a PAM4 optic, check:

Switch → Host Interface → Transceiver → Fiber → Transceiver → Host Interface → Switch

The complete link needs to be compatible.

Check the following:

1. Data rate

2. Ethernet standard

3. Host electrical interface

4. Lane configuration

5. Optical interface

6. Fiber type

7. Transmission distance

8. FEC requirements

9. Module form factor

10. Equipment compatibility

This is especially important when upgrading an existing network from 100G to 400G or from 400G to 800G.

Is NRZ Still Used?

Yes.

The move toward PAM4 does not mean NRZ has disappeared.

NRZ remains useful in many applications because of its simpler signaling and relatively large signal margin.

The technology you need depends on the application.

A lower-speed link may not benefit from the additional complexity of PAM4, while a high-speed interface may require the signaling efficiency that PAM4 provides.

So it is better to think of NRZ and PAM4 as different signaling approaches for different system requirements, rather than simply calling one "old" and the other "new."

NRZ vs PAM4: What Should Optical Transceiver Buyers Remember?

If you only remember five things from this article, remember these:

1. NRZ uses two signal levels

One symbol carries one bit.

2. PAM4 uses four signal levels

One symbol carries two bits.

3. PAM4 improves signaling efficiency

It allows higher bit rates without increasing the symbol rate by the same factor.

4. PAM4 comes with tighter signal margins

It generally requires more sophisticated signal processing and careful system design.

5. Speed alone does not determine compatibility

When choosing a 400G or 800G optical transceiver, always check the complete link architecture.

FAQ: NRZ vs PAM4

What is the difference between NRZ and PAM4?

NRZ uses two signal levels and carries one bit per symbol. PAM4 uses four signal levels and carries two bits per symbol.

Why is PAM4 used for high-speed Ethernet?

PAM4 increases the amount of data carried per symbol, allowing higher data rates without requiring the symbol rate to increase proportionally.

Is PAM4 better than NRZ?

Neither is universally better. PAM4 offers higher signaling efficiency but has smaller signal margins and greater implementation complexity.

What optical transceivers use PAM4?

PAM4 is widely used in modern high-speed Ethernet solutions, including many 400G and 800G optical transceivers. The exact implementation depends on the Ethernet standard and transceiver architecture.

Does PAM4 always require FEC?

No universal rule applies to every PAM4 link. FEC requirements depend on the specific PHY, Ethernet interface, standard and equipment implementation.

Can I use a PAM4 optical transceiver in an NRZ port?

Not simply because the transceiver has the same form factor. Host interface, signaling, lane configuration and equipment compatibility must all be verified.

Why is PAM4 important for 400G and 800G?

PAM4 allows more bits to be transmitted per symbol, helping network designers achieve higher aggregate bandwidth while managing the limitations of very high signaling rates.

Choosing the Right Optical Transceiver

Understanding NRZ and PAM4 is useful, but it is only one step in selecting the right optical module.

Before placing an order, confirm:

Speed:
100G, 200G, 400G, 800G or higher

Form factor:
QSFP28, QSFP56, QSFP-DD, OSFP and others

Distance:
SR, DR, FR, LR, ER, ZR and application-specific options

Fiber:
Multimode or single-mode

Host compatibility:
Switch, NIC, server or other networking equipment

Signaling:
NRZ or PAM4, where applicable

FEC:
Required configuration for the specific platform

Link budget:
Especially important for longer-distance links

Taking all of these factors together is much safer than choosing an optical transceiver based only on its advertised speed.

Final Takeaway

The transition from NRZ to PAM4 is an important part of the evolution of high-speed Ethernet.

The basic difference is easy to remember:

NRZ = 1 bit per symbol
PAM4 = 2 bits per symbol

PAM4 makes higher-speed signaling more practical, but it also introduces tighter signal margins and greater demands on signal processing and system design.

For optical transceiver buyers, the key lesson is simple:

Don't choose an optic by speed alone. Check the signaling, host interface, lane configuration, FEC requirements, fiber, distance and complete link architecture.

As networks continue moving toward 400G, 800G and higher speeds, understanding the signaling technology behind the optical module can make network upgrades and transceiver selection much easier.

Related Optical Knowledge Series

Optical Knowledge Series #05 — FEC
Understanding how Forward Error Correction helps high-speed links maintain reliable communication.

Optical Knowledge Series #09 — PAM4
A closer look at the signaling technology behind modern high-speed optical communication.

Optical Knowledge Series #10 — NRZ
Understanding NRZ and why the industry moved toward multi-level signaling.

Need Help Choosing a 400G or 800G Optical Transceiver?

Sate Optics provides compatible optical transceiver solutions for data centers, enterprise networks, telecom, ISP and other high-speed networking applications.

Looking for 100G PAM4, 400G QSFP-DD, 400G FR4, 400G DR4, 400G LR4 or 800G optical transceivers?

Share your switch or NIC model, required distance and fiber type with our team, and we can help you identify a suitable optical solution.

Contact Sate Optics to discuss your next optical networking project.