Playing with a pencil on a checkered sheet I encountered this construction:
1) take a point $A$ on the grid and a point $B$ that is distant from $A$ $n=2,3,4...$ horizontal steps and $1$ vertical step, so that $\overline{AB}=\sqrt{n^2+1}$.
2) complete a square $ABCD$ on the grid starting from the segment $AB$. This is the square $Q_0$.
3) Starting from $A$ take a point $A_1$ at the first intersection of $AB$ with a line of the grid. And do the same starting from the other points $B,C,D$ finding the points $B_1,C_1,D_1$ .
4) connect the points $A_1, B_1,C_1,D_1$, so that we have a new square $Q_1$.
5) redo the same points $3$ and $4$ and find the square $Q_2$ and so again...
The result is a sequence $S_n$ of squares whose sides, orientation, and number of different elements depend from $n$.
The figures show the construction for $n=2$, and for $n=3$.
Note that it seems that the sequence $S_2$ has infinite different elements that converge to a square of the grid, but $S_3$ has a finite number of different elements.
So a first question is:
How we can prove that the number of different elements of $S_n$ is finite or not and, if finite, what is this number?
A second question is to find the length of the last square in the sequence, or the limit of the lengths if the sequence has infinite different elements.
More general, the side lengths of all the squares in a sequence $S_n$ can be determined in some way that does not require a terribly boring calculation?
Added: construction of the first six elements of $S_4$.



This is not a full answer, but also longer than a comment. I want to share my insights.
If $n$ is even, the center of mass of the initial square is not on one of the grid points (lattice points). Another observation, the center of mass will always be the center of mass of a unit square in the grid. Last observation, by construction, we are creating smaller and smaller squares which share the same center of mass. Due to these three observations, I believe for even $n$, the limit will be the unit square around the center of mass.
For odd $n$, the center of mass of the initial square will be a grid point. The construction process above will stop when the half of the diagonal of the final square is less than unit length. This can be easily proven by observing that the circle with center at the grid point and radius equal to the half of the diagonal intersects with the grid only at the corners of the final square and nowhere else. Now, the issue is to figure out how the length of the diagonal changes throughout the process.
Conjecture for odd $n$: as $n\to\infty$, final square will converge to the circle in $l_1$ norm. This is a good counterpart for even $n$, because $S_n$ converges to the circle in $\max$-norm.