Mark Maybee wrote:
Yup, your assumption is correct.  We currently do compression below the
ARC.  We have contemplated caching data in compressed form, but have not
really explored the idea fully yet.

The same applies to encryption, the current play is to encrypt just after where we currently compress. There are advantages to caching the encrypted rather than clear content in some cases, and disadvantages in others (it depends on what risk you are attempting to mitigate by using encryption). My first cut at encryption for ZFS did actually encrypt what was in the ARC - but that was a mistake because I had no hook to decrypt it.

--
Darren J Moffat
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