Make colors transparent using the "Color Fading" extension

How do I make colors transparent using the Color Fading extension, if at all possible.

as far as I know, it is impossible. You would need RGBA or HSVA, and it only allows RGB and HSV.

The trick would be to create other colors that pretend to be clear and would show up when a “transparent” color was on top of a non-transparent color. Because only 16 colors can be displayed at once in Makecode, this would limit your base palette quite a bit, as most of it would be taken up by these in-between-color colors, unless you were very creative in your palette choice. You would also have to create your own code for rendering these in between colors when a transparent pixel was “on top” of a normal one. I’ll say that this is 100% possible, as this “in between color” thing has been done in the lantern extension.

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