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Vertical encoding is a type of instruction set that encodes a field of an instruction word before being converted into signals that control functional units of a computer. It uses hard-wire logic or microcode base encoding to generate control signals for functional units.
Vertical encoding is primarily the part of a computer / processor instruction set architecture that deals with micro set instructions. Vertical encoding works by implementing a decoder / encoder between the microinstruction register and the clock or control signals. Each instruction sent is decoded before being sent as a signal. It requires additional logic to convert or encode the instructions into corresponding signals; therefore, it also is slower than horizontal encoding.
Vertical encoding also restricts selecting more than one register for an operand and requires only one register per instruction field.