An improved data transmission system is disclosed in which data encoding such as Data Bus Inversion (DBI) in a transmitting device is matched to the termination scheme being used in a receiving device. In the improved system, the transmitting device is able to automatically discover the termination scheme being used in the receiving device, and is thereby able to automatically implement a data-encoding algorithm to best match the termination scheme being used. In one example, Information concerning the termination scheme can be communicated to the transmitting device via a control channel, or another channel otherwise dedicated to data encoding such as a DBI channel. In another example, the transmitting device can infer the termination scheme being used via measurements, or by understanding how the receiving device will modify its termination scheme given current data transmission conditions. Alternatively, the receiving device is able to discover the data encoding scheme used in the transmitting device and is able to configure its termination circuitry accordingly.