Are they hiding form something, is it just a result of their love for mining or something else entirely?
I'll go first
Why do your dwarfs live underground (if you have them)
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That's where they were given to live, but they don't all live underground.
There are a number of families that live outside and operate as border guards and rangers. Protecting the mountainsides from intruders, dangerous animals and enforcing their nations borders.
After the collapse they will abandon their mountain homes and build a nation for themselves as hill dwarves.
what happened during the collapse?
The gods left, and without their influence the order they created fell apart. Dwarfs were traditionally very orderly, and some started to become more lawless and independent, leaving the underground to live on the surface. The dwarfen families I mentioned who lived as rangers are all too independently minded to live with their kin under the surface.
The elves were traditionally on the other end of the spectrum, living long solitary lives with no ambition other than to care for the forests they called home. Some of them became ambitious and engineered a war to try to consolidate all authority to themselves. They lost the war, but the normal order was shattered.
The elves who participated were cursed and exiled to the swamp that was once their forest home.
The dwarfs were splintered into mountain dwarfs, hill dwarfs, and coastal dwarfs who lived by the sea and became accomplished fishermen and ship builders. Some remained homeless and became travelling performers or bandits.
Coastal dwarfs lost their more rotund body shape as they adapted to their new environments. They have more streamlined bodies and are accomplished swimmers.
The elves trapped in the swamps became ugly. They gathered into covens and used their magic to cause pain and suffering in the world while they plotted their revenge.
Humans live in the plains and represent the middle path between the extremes of the dwarfs and elves, as such members of both races who can't adapt to their own nations will flock to human kingdoms where they are more comfortable.
The idea behind this world was a conflict between order and independence, not good and evil.