This document presents a new optimized block estimation based image compression and decompression algorithm. The proposed method divides images into blocks and estimates each block from the previous frame using sum of absolute differences to determine the best matching block. It then compresses the luminance channel using JPEG-LS coding and predicts chrominance channels using hierarchical decomposition and directional prediction. Experimental results on test images show the proposed method achieves higher compression rates and lower distortion compared to traditional models that use hierarchical schemes and raster scan prediction.