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Do you mind giving a little explanation on this quest? I wasn't able to understand what to do at all...
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The beginning of this is a little sketchy.
As far as I know, there were no clues from NPCs hinting towards this... I just saw people diving and disappearing. Figured out the next part the same way.
Oh, and confirmation please: the only two dig-ables are the note and necklace, correct? The 1000+ people digging all over the island are just lunatics?