It’s a point cloud. I have a niagara system that replicated a point cloud effect and they don’t do this weird fuzziness issue. But the real point clouds imported as a .las file created from photogrammetry, they have the fuzz issue. They’re not billboards or particles. The LiDAR plugin documentation says that each point is made up of two triangular polygons to represent the data from the point cloud index itself.
So technically, maybe they are billboards but they’re being drawn up in the back end by the LiDAR plugin.