Here I programed the receiving attiny85 to sample the incoming pwm signal when it was high. When the signal becomes high, a ctc counter starts and counts the amount of the time the signal has been high for, thus giving our duty cycle.
With this, at specific duty cycles, a certain state will turn on. With 4 different duty cycles that could be make from the transmitter attiny85, there were 4 different states that could be turned on from the receiver side.
Here is as demo of it:
Since the state machine was working, that means the duty cycle measuring technique works, so for now on will use this method of signal encoding.