Anaconda equivalent RFE has all the background:
https://bugzilla.redhat.com/show_bug.cgi?id=1851276

As it relates to appliance-tools, the variant that makes the most sense to me is:

1. Use 'mount -o compress-force=zstd:9' (or higher level as resources allow, up to 15) upon first mount when assembling prior to the installation. That way the install image itself is as highly compressed as possible/desired.

2. Set the /etc/fstab mount option to 'compress=zstd:1' which has a couple of optimizations. One, it's the least level of compression, thus faster. Two, it has uses Shannon entropy to cheaply estimate the benefit (or lack thereof) of compressing to do an early bail out, i.e. not attempt the compression at all, on a per block basis.

This is fairly conservative. As we learn more about the various tradeoffs, we might get more aggressive.

Facebook currently uses compress=zstd:1 across the board times millions of machines, there's no place they don't use it.