I wouldn't use billboards for this, but anyway:
Any image editing software will do, and you need the MaterialEditor to import the texture into the game.
There are many ways to do this, but here's how I make translucent billboards:
The billboard texture needs to have a black background - basically the darker a part of the picture is, the more translucent it will be in the game. Black = see-through. When you're done with the texture, place it in /billboards or /textures in your mod. Open the MaterialEditor and under type select "translucent" and under Blend mode choose "Add".
Select the "Diffuse" tickbox and choose your texture in the appropriate textbox which will show up. Save the material in the same folder as your texture and you're good to go.
When you want to place your billboard in the LevelEditor, you will need to navigate to the appropriate folder from the billboard option menu and select the material from there.
Also join the Discord server if you want more immediate feedback
Invitation link(you need an account first):
https://discord.gg/6CpjseC