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> 8-bits works fine with a bit of dithering

Yes, but the place where you want dithering is in the display, not in the image. Dithering doesn't work with compression because it's exactly the type of high frequency detail that compression removes. It's much better to have a 10 bit image which makes the information low frequency (and lets the compression do a better job since a 10 bit image will naturally be more continuous than an 8 bit image since there is less rounding error in the pixels), and let the display do the dithering at the end.




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