This is usually handled on a lower layer - you only use this algorithm if you can assume the updates are guaranteed and ordered. This of course means using more costly network protocols (either TCP or something custom on top of UDP), but for most game systems it's good enough, since they don't get updated that often. And for objects positions you combine the two: have reliable object state synchronized via guaranteed and ordered protocol a couple times per second, but also have UDP updates on top of it, while keeping the "reliable" copy to use for compression with the next reliable update.