Dyes were added in 1.2 not 126.96.36.199. Just covering myself in incase comments arise. You'll need to find Blueberries in the Forest Biomes on the surface. Basically find alot of trees packed close together and you'll eventually find Blueberries. After you do that you just need a Dye Vat from the Dye Trader for 5 Gold and , poof. You have your Dye!
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Blue Dye is an item that can be placed in the Dye Slots of a player's Inventory to alter the...