So I’m fairly confused about the origins of Dust. In ES1 it was said that it was originally an Endless nanomachine that was made to help the aquatic species of Tor adapt to life in space. It eventually got smaller, the uses for it spread, and that Dust nodes started creating mini intelligences among themslves. But I think this game changed that lore to where the Endless modified Dust from a pre existing source, and that one of Isyander’s goals is to restore Dust to its state before the Endless tampered with it. Am I correct or is there more?

Wow that’s actually super helpful, thank you so much. Never knew the Heart in Koyasil was one of the Lost, that’s news to me. Thank you!

Yeah haha of course ! Oh oops; you find out in the Unfallen Main Quest, and it's actually interesting how the quest goes about telling the story of this particular Lost. 

Cool suisi! i never really understood much about the lore of dust and now i understand it better. But let me see, what is the difference between virtual and concrete endless? i din't understand it.

The Virtual Endless were a faction of the Endless that split from the Concrete Endless after the creation of virtualization technology (which supposedly happened on a research station orbiting the unique planet Bilgeli). Virtualization is the process of uploading one's consciousness into a machine network. The Vodyani virtualization technology is an adaptation of discovered Endless virtualization tech. The Endless Wars (which really caused a big mess way back in the day) was the conflict between the Virtual & Concrete, but the main difference between the two is the Concrete Endless still inhabit their biological bodies whereas the Virtual endless were pseudo-machine counterparts of the species. 

but why pseudo-machines and biological beings of the same "type" or species would fight themselves? what happened that one side declared war on another?

Velorace wrote:

but why pseudo-machines and biological beings of the same "type" or species would fight themselves? what happened that one side declared war on another?

Massive ideological shifts in their culture polarised the two factions over time to the point of all out war.

Basically what humanity went through with the Crusades.

Yeah @mrbiggs007 and @UndeadPuppy pretty much answered it. 

To put it further, it can be assumed that both factions believed that their way of life was better than the other, there may have also been a conflict over Dust in relation to both the Virtuals and Concretes (hence the name Dust Wars), but there isn't much information that the DEVs have given other than what the previous two people have stated. 

Also, the Virtuals weren't like straight up AI sentients where they lived in computers and what not. Many were like the Haunts on Auriga, ghosts, and wraiths (if you watch the Cravers prologue that's assumedly the standard "form" of a Virtual Endless). They also lived in the Cloth that the Vodyani now use, as it was originally suits used by Virtuals in combat, and also inhabited a number of machines, such as Rayarens old construction suit and the creation of the Cravers, which were suppose to become Wasps, fully mechanized beings that a Virtual could transmit to at any time and anywhere (see Cravers Religious quest)