First step
Make your own icon
Out of laziness, I'll use my avatar as an example



Step Two
Image>ImageSize set the width and height to 86 pixels, icons in the game work on 96 pixels but for some reason the game likes to crash when we upload icons with a higher quality than 86 pixels
Congratulations, your picture looks like shit



Step Three
Image>Mode>Index color
set to 256 colors, any Local or Master mode
Check Transparency
Another congratulations, your picture looks even worse
Optional, remove all black pixels from the edges of the image, for some reason the game will add a white border to your icon so the black pixels will be visible



Step Four
Delete pixels at heights 1 and 86 and widths 1 and 86
Your image will have dimensions of 85x85 pixels and an empty space at 86 pixels, so it will not overlap other icons



Step Five
Finish this icon by hand because it probably looks like shit

Step Six
Extract res.pak
(or any other pak file you want to put the icon in)
Open materials/Black.png
(or any other png but Black.png seems the safest for editing)
Put your icon here, set the indexed color, save
reimport to the game



Step Seven
In data.cdb set the path to the icon e.g
"icon": {
"file": "materials/Black.png",
"size": 86,
"x": 13,
"y": 1
},


In my case it's x 13 and y 1
The first field is always field 0, the second field is always field 1, etc
To make counting easier, I recommend using a grid in Photoshop, but since this is your first icon, you'll probably set x 0 and y 0
size 86 of course

Fun Fact, I did it  181 times to add all icons for update 1.8

Good Luck