This is quite hard to achieve from scratch imo and unfortunately I can't provide a perfect solution. But I can give you some ideas about this:
- This programmatic blending requires a custom shader. I don't know about your skills in shading language, but this would be something like multiplying two textures depending on the Y coordinate. Also I am not sure how this would work combined with your procedural mesh generation.
- The rounded edges you want are almost impossible to achieve with a blocky mesh like this. (at least as far as I know) This would only work with **1. no light (therefore no shadows)** and **2. from only one special point of view** (or MAYBE with Parallax occlusion mapping ...). As soon as you changed the point of view, you would see the edges.
The fastest, easiest and best looking solution here most likely **is** to create different textures for all those combinations. [Minecraft did the same.][1] ;)
[1]: http://s1.hubimg.com/u/4915266_f520.jpg
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