La decoloración reduce el contraste.

Spanish uses definite articles much more often than English, especially with general or abstract nouns.

So:

• La decoloración = fading / the fading / discoloration
• El contraste = contrast / the contrast

In a general statement like this, Spanish often sounds more natural with the article, even where English leaves it out.

So La decoloración reduce el contraste is a normal Spanish way to say a general truth.

Because nouns ending in -ción are almost always feminine in Spanish.

Examples:

• la decoloración
• la información
• la solución
• la reducción

So the article is la, not el.

Reduce is the third-person singular present tense of reducir.

The subject is la decoloración, which is singular, so the verb must also be singular:

• la decoloración reduce = fading reduces

A quick comparison:

• yo reduzco = I reduce
• tú reduces = you reduce
• él/ella reduce = he/she/it reduces
• la decoloración reduce = fading reduces

It is not reducir, because that is the infinitive, to reduce.

It is not reducen, because that would be plural, used with a plural subject.

Noun gender in Spanish is not always predictable from the ending.

While many nouns ending in -o are masculine and many ending in -a are feminine, nouns ending in -e can be either masculine or feminine.

So you simply learn this one as:

• el contraste

It is a masculine noun.

The accent mark shows where the stress goes: decoloración is stressed on the last syllable:

• de-co-lo-ra-CIÓN

That written accent is necessary because, without it, Spanish spelling rules would normally place the stress elsewhere.

A useful pattern:

• words ending in -ción almost always have stress on -ción
• examples: información, situación, reducción, decoloración

It is a real and correct word, but it can sound a bit technical or formal depending on context.

In everyday Spanish, people might also say:

• la pérdida de color = loss of colour
• el desteñido / estar desteñido = fading / to be faded
• la decoloración = discoloration, bleaching, fading, depending on context

So this sentence is grammatically fine and natural, but the exact choice of noun may depend on whether the context is technical, visual, photographic, medical, textile-related, etc.

Yes. Disminuye is a possible alternative.

Compare:

• La decoloración reduce el contraste.
• La decoloración disminuye el contraste.

Both are correct and natural.

The difference is small:

• reduce focuses on making something less
• disminuye means decreases, lowers

In many contexts, they are very close in meaning.

Yes, although the original order is the most straightforward.

Standard version:

• La decoloración reduce el contraste.

Other possible versions:

• El contraste se reduce por la decoloración.
  = The contrast is reduced by fading.

• La decoloración hace que el contraste se reduzca.
  = Fading causes the contrast to be reduced.

The original sentence is the simplest and most direct.

It can cover several related ideas, depending on context:

• fading
• discoloration
• bleaching
• loss of colour

So the exact English translation depends on what is being discussed.

For example:

• in image or print contexts, it may be fading
• in hair or chemical contexts, it may be bleaching
• in medical or material contexts, it may be discoloration

That is normal in Spanish: one word can match several English words depending on context.