MP3 recording -HOW?

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hi , does anyone know how the pa3x, 4x and 5x record direct to mp3 ? As far as I can tell mp3 is defined as a compression algorithm to compress digital audio files like wav or aiff by removing unneeded or extraneous data, that suggests there must be a digital file to compress or is the recording and compression done on the fly so the keyboard strips 75% of the digital audio data of the live stream being played