Based on discrete diffraction light, an algorithm of holographic grating bandwidth compression is proposed. As is known to all, the visual resolution of human eyes is quite limited. That is, human eyes cannot perceive the jump of light beams within the 8 mm-1 variation of space frequency (angle between two light beams is less than 0.30°). At first the frequency spectrum of diffraction light is sampled so as to make holographic grating diffraction discrete in space frequency, namely, in the grating code is included discrete frequency spectrum, which satisfies requirements of human vision. In this case, the fringe function of the grating becomes a periodic one, and what is needed, therefore, is to record a periodic functional value (sampling value). As a result, the sampling value of such fringe function can be effectively compressed. Subsequently, all sampling values of the fringe function can be restored in decoding right by means of copying. This method that can not only compress data but also upgrade transmission rate achieves the desired dynamic display.