I dropped my iPhone Xs into a hot dishwasher, will that damage the data on the iPhone?
No.  It doesn't damage the data, per se.

Heat, steam, and water may damage the physical phone, but it won't go in and start corrupting data.  The ones and zeros stored on the chip(s) aren't perishable.  When data gets corrupted, the whole file gets "damaged" to the point of being unusable; it won't lower the resolution to the point of being grainy.  This is not a photo on paper. 

However, if you damage the phone in such a way that the phone is inoperable or the storage is damaged then the data becomes inaccessible.  If you sync your data to the cloud (iCloud, OneDrive, etc.) then your data remains accessible.

If/when you go to the Apple store for service, they will first check to see when your last backup was; even if you have iCloud.  If you don't, you'll be read the riot act and given a disclaimer and acknowledgement that they're not responsible for data loss.

This is why backups are so important.  

While data can be sync'd to the cloud, it should not be considered backup.  Changes you make on one device get sent to the cloud storage and every other connected device.  A quick trip through the dishwasher won't change your data but if it hasn't sync'd or it wasn't set up, you could lose your data.

Grainy Photos

This is likey from your LCD being damaged.  If you want to confirm this, open the same photo on your computer or send it to a friend.  If it's clear there, your phone is damaged.