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If it's in the "ruin" state then that's not a reset. The island has simply decayed. Towers will crumble to just foundations and citizens will lose their tools the longer you're away from an island. If the island "resets," no buildings will be present on the island. In my case, the island completely reset - the geography changed. This suggests that the game either lost or couldn't read the island save file, so it generated a new island.
The game doesn't appear to have any sort of safeguard for this happening built in. I lost my second island entirely, but I kept all of the Gems, all of the unlocks and the stone mine, even though I hadn't interacted with any of these. This tells me that "unlock states" and "gems" are saved independently and no attempt is made to match them against island structures.
Customer Support had me send in my save files (they're under %appdata%\..\LocalLow\noio), so I had a brief root around while I was there. I'm seeing a lot of null pointer exceptions in the log files, but it's entirely possible that's by design. I also found out that each island has its own separate save file, so I can track the date of last update of each island. I suspect the game loads them in by hard-coded name convention, which might explain why we only have three save slots, rather than "as many as we want." Can't really tell.
Long story short - contact Customer Support. This is an actual bug.
That would be really helpful for when we investigate this bug!
This is the 2nd time it has happend since the update. And ofcourse it happens just as I am about to finish the game.
Additional notes: after respawning on island one everything we had purchased with gems was still purchased despite the island resetting. When we got to island two it was in the post-reset state we had died at the first time with our 3-4 walls and the people we left behind like normal. However all the gem chests respawned giving me five gems that I had already spent and I was completely unable to purchase the hermit, the hollow gems/coins simply did not appear above the hut as if it was already gone.
we are on the medieval setting
Same, died on three and one was completely reset when i respawned, including the logo. Only difference is that i was playing it on my Switch at the time, so worth noting that it's affecting multiple platforms I guess.
I tried reloading my previous save from the dock at island 5. Travelled to island 1. This time it was also reset but the geography was different - the camp was in a different location in relation to the boat etc.
I'll bet you this was the case the first time Island 1 "reset" on you. The islands don't return to a previous state in my experience. It directly rerolls. As far as I can tell, the game fails to load your old island save file for some reason, concludes it doesn't exist and rolls a new save file, instead.
It's also important to note that upgrades and gems don't reference the island they were sourced from. They're saved directly into the save slot. If you have a Hermit or Mount or Statue unlocked, you have it unlocked for the save slot. If the island where you picked up the gems resets, you get extra gems because the game has no means of tracking which gems you got from what island..
The island reset bug is annoying, but it can also give you a LOT of extra gems for the above reason.