With a 50 Gbps lane rate being the fundamental basis of reaching 400 Gbps, the first major decision was to change the signal encoding scheme. Up till now, all Ethernet standards have used simple 2-level Non-Return-to-Zero (NRZ) method for encoding a binary data stream into a transmittable electrical signal. To attain a higher lane data rate, an encoding scheme known as 4-Level Pulse Amplitude Modulation (PAM4) needed to be used, which effectively doubles the amount of data transmitted in the same amount of time.
If you think of binary data represented by a signal with two voltages, one voltage for a “0” and the other voltage for a “1”, then this describes the NRZ encoding method. For PAM4 encoding, the signal has four voltage levels, which encodes two binary bits per voltage level. A method known as “Gray coding” combines the most significant bit (MSB) and least significant bit (LSB) pairs in a data stream into one of the four voltage levels. Gray coding helps to reduce the bit errors in the signal caused by voltage amplitude noise. It is easy to see how with two data bits mapped to one voltage level, double the information can be transmitted in the same amount of time.