1. A method for video encoding comprising: transforming a plurality of pixels to generate a first plurality of transform coefficients; quantizing the first plurality of transform coefficients to generate a plurality of quantized transform coefficients; computing a plurality of prediction pixels based on a plurality of reconstructed pixels which are prediction references for the plurality of pixels; transforming the plurality of prediction pixels to generate a second plurality of transform coefficients; and computing a plurality of prediction residual coefficients as a difference between the plurality of quantized transform coefficients and the second plurality of transform coefficients.