Official The Oasis!

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You are correct! If there is enough water within a certain distance, oasis plants will grow instead of cacti. The cattails will grow anywhere on sand if the water depth is right. Dragonflies will spawn anywhere near cattails.

So we can terraform a whole desert into an oasis with nice enough pickaxe + a Bottomless Water Bucket.

Neato. Definitely putting that on my bucket list.
Neat. Do the plants around the oasis generate on world creation or do they always spawn on sand near a desert lake?

EDIT: Nevermind. Someone already asked and got the answer.
How does it fit into the world? Will it spawn instead of pyramid or something like that? And is it a separate fishing location or it counts as desert?
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Not sure if the armor that character is wearing is Spooky armor. It looks similar, yet some of the details don't match up. Could we be getting a new armor set?
The original palm trees grow near the beach still. The new ones grow in the desert only.
That's great to hear. Oceans get coconut palms and deserts get date palms.
Can palms in the desert grow automatically as a part of the oasis or only at world gen and by planting them?
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