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1. Create a staging OCFL repository for constructing squashed objects
2. Create the object in the staging repository
3. Copy over each version of the original object into the staged object up until the beginning of the squash by replaying the changes that were made in each version
4. Diff the squashed changes. For example, if you're squashing versions v4 through v8, then you'd create a diff between v3 and v8. This diff represents the changes that should be applied to the object to create the squashed v4
5. Create the squashed version by applying the diff
6. Proceed to copy over any remaining versions in the same manner as in step 3
7. Validate the newly formed object
8. Purge the original object
9. Import the staged object
10. Reindex

Notes

The only feature to support this that ocfl-java is currently missing is the ability to generate a diff between versions, but this would not be hard to add.The advantage to doing it in a separate repository is that you can use the same object id and do not need to rewrite the inventories later.