1. A method for encoding a source image, wherein the source image includes a set of bitplanes of pixels, comprising, for each bitplane in a most to least significant order, the steps of: obtaining a list of significant pixels (LSP), a list of insignificant pixels (LIP), and a list of insignificant sets (LIS) according to a hierarchical ordering of the source image pixels; synchronizing the LSP, LIP and LIS of the source image with the LSP, LIP and LIS of a key image; constructing a temporary list of insignificant sets (TLIS) for the source image; and applying syndrome encoding to the LSP, LIP, and TLIS of the source image to obtain syndromes corresponding to magnitudes and signs of pixels in the source image, wherein the steps are performed in a processor.