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Basic idea is that gray texture is a horizontal lookup value for palette texture. I usually give little offset because the value is right on the border between colors, maybe that’s the problem. The offset I use is -1/colorcount*0.5 to be in the middle of the palette color. Then add a vertical offset to choose the palette row on the palette texture.

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I understand the theory behind it, but It seems I need to up my shader knowledge

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got it working spent 3 hours, just needed to remove "hint: albedo"

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Yeet!