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Hurri04: Combining multiple terrain layers would be possible probably but it's also complicated to handle (in the editor as well as in automatic terrain generation). I prefer to keep it simple.
I'll release a download as soon as it makes sense.
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Lion_Hearted: Of course I'm aware of this possibility but the resulting blocky look will still be there even with complicated smoothing attempts. Also I'm not trying to clone Minecraft here and digging and caves are not an essential feature for a survival game.
And about the suggestion not to render everything at once: I'm programming games for over 10 years now. You really don't have to tell me the totally obvious noob stuff...
My current plan is to have cave models at the top of the terrain as "portal" to an underground section which consists of models (and therefore allows all types of terrain shapes). This method splits overground and underground for best performance.