One thing that seems to be unmentioned so far in the conversation: xz is public domain, while lzip is subject to the full-blown GPL (v2 or later).
In any case, I don't really bother with compression for my own archival needs. Storage is cheap, and encrypted data is kinda hard to reasonably compress anyway.
Because I usually think about encryption long before I think about compression; the latter's a bit of an afterthought. Ain't the most logical answer in the world, and if I planned from the outset to both compress and encrypt then I'd do it in that order, but compression usually doesn't cross my mind for archival (whereas encryption is pretty much the default for any data I have that's worth archiving).
Isn't that a limitation of the implementation, which can be worked around by creating a new implementation with whatever licensing you want based on the format specification?
OTOH, a limitation of the spec cannot be worked around by any new implementation.
(OT - isn't it generally recommended to compress before encrypting? Encrypting is CPU-intensive so the less you have to encrypt the better, also length can be a side-channel, and don't some encryption methods leak the existence of patterns in the source data which compression will eliminate?)
In any case, I don't really bother with compression for my own archival needs. Storage is cheap, and encrypted data is kinda hard to reasonably compress anyway.