Dithering

../../../_images/shaders_dithering_texture.png

The dithering texture used in Shadow Generations

../../../_images/shaders_dithering.gif

A circle slowly dithering out (recreated in blender) (scaled up by 400%)

Dithering, specifically transparency dithering, is a technique used in shaders with alpha-clipping (which is usually used with the punch-through mesh layer) to make a fade-out effect without having to use transparency blending.

All Hedgehog Engine 2 shaders have dithering code implemented (only confirmed for Shadow Generations right now), but more research is required to understand under which circumstances it is used.