Displacement testing - unable to get shading

Danface

I've started to mess around with displacement maps for MeetMat2 contest and I'm able to get the deformation on the model but there is no shading on it.

Any ideas would be greatly appreciated. 

Displacement map:

Danface

Using the normal gave me the depth but now I have jagged areas where the deformation is. Any ideas on how to remedy this?

EarthQuake

So to answer your first question, you'll need to use a normal map. You seem to have figured this out, but the displacement function only displaces the mesh, it doesn't alter the shading of the mesh.

To the second question, you can get a smoother result by sub-dividing the mesh. To do this you can add Flat or PNTriangles to the Tessellation module and adjust the slider.