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WorldGen V2 in Hytale enables custom biome creation through a node-based interface. The tutorial covers enabling WorldGen V2, setting up custom mod folders, configuring world structure files with height definitions, and using the asset node editor to design terrain. Key concepts include terrain density functions using noise patterns, material providers for block placement (solid vs empty), curve points for Y-level control, and layered material systems for creating grass, dirt, snow, and water features. The node editor allows real-time iteration with immediate visual feedback using viewport radius controls.