Diagnosis
Probably not defective. That's the characteristic of the infrared (IR) night vision this and most monitors use. It's inherently monochrome (black and white/ green) because the camera sensor is detecting IR light, not visible color. Grain is common in very low light.
How to Fix It
Improve the ambient IR light. The camera has built-in IR LEDs, but they have a limited range. Make sure the camera is within the recommended distance from the crib (not too far). Also, see if any other IR light source is interfering, like another baby monitor or security camera. You can try enabling/disabling the "Night Vision" mode in the app to force it to reset.
If That Didn't Work
Add a tiny bit of visible light. A nightlight with a red or amber bulb (colors less disruptive to sleep) in the room can provide enough light for the camera to sometimes switch to its low-light color mode, which is often clearer than the pure IR mode. Just a sliver of light from a hallway can also help.
Heads Up
The video feed will always look worse on the app than a recorded clip because the live stream is heavily compressed to save bandwidth. For a true test of quality, look at a recorded video or snapshot from the camera. If *those* are extremely grainy and distorted, then there might be a hardware issue with the camera sensor.