any amount of colors are usable. umbreon, for example, and many other pokemon have much less coloring. it is and always was PNG.That's a shame. I can't see the sprite through the JPEG artifacts. Just a reminder: always save sprites as PNGs. It will save you a lot of grief in the future.
Pixel overs are not scratches. To be honest, the best description of this sprite is "sloppy"; it looks so dirty that I didn't realize that it wasn't a JPEG until I actually checked. It looks nothing like the D/P Pokémon sprites at best (No, you may not use only 12 colors; 14-15 out of the 16 colors are typically used in D/P sprites), and needs either a severe clean-up or to be completely redone. Apologies for sounding harsh, but practice is simply a necessity for good scratches.
As long as CAP 5 sprites are being posted, I may as well post mine.
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it is not a sprite over. i took his picture, sized it down, outlined the edges to make a black display, colored it in and then scratched the rocks.
i have a much newer version of the sprite which you can check on the thread, also, please, give some reasonable criticism..
as for your sprite. it's way too small, and other than that, it's just plain compared to some of the other stuff that people have come up with. wyverrii, for example.