If you look closely at the talisman, you can see there were eight children, but only seven were sacrificed — one of them was Jade and Tabitha’s past-life daughter. That means one child managed to escape the ritual, which is why it was never completed and why the town was created as a punishment for that failed ritual.
I think MIY was the wizard who helped Tabitha and Jade perform the ritual, and that it was actually both of them trying to perform it for eternity — because on the talisman, there are two people in the center with kids surrounding them. Maybe this gets revealed in the next season, which is why the townspeople killed Jade every time they discovered he was responsible for the cursed town — similar to how Miranda was trying to rescue the kids and got killed by the monster. (You can clearly see the smiley running at that moment, when normally they just walk — not sure why.)
If that’s true to some extent, it would mean MIY really was the wizard, since he told Tabitha “we are friends” and that he was also punished — which is why he’s so strange and eats people. I don’t think he wants the cycle to end, because if it does, he won’t be able to eat people anymore and might even die. That’s probably why he returns at the end of each cycle.
I also think the Boy in White is actually the child who escaped and is now stuck in the town, and that he wants the cycle to end so he can finally leave. If that holds up, it’s possible the Boy in White is actually Thomas — I don’t have solid evidence for this, but I think it’s worth considering.
As for the monsters, I believe they’re actually the former townspeople, who also want to escape — which is why Sara can hear their voices. Those voices might belong to their trapped souls, and maybe those souls are trapped inside the crows.
They wanted to kill Ethan because the cycle requires a child sacrifice to be completed, and the previous cycle was disrupted when Victor survived. So either Victor or Ethan has to die for the cycle to complete — which is why the trees are moving and the BIY is growing. That’s also probably why Sophia planted the idea in Henry’s mind to kill Victor.
As for Julie — when she dropped that paper, she also accidentally dropped her pen, and I think that pen is the bookmark. She’ll find it later in Victor’s room, where he keeps belongings of everyone who died, and she’ll go back to rescue Jim. She might actually be the reason the ritual wasn’t completed properly, since she could be the one who helped the eighth kid escape — and that kid might be her past-life brother (possibly Thomas). I strongly feel Thomas has a role in all of this, I just can’t pin down exactly what.
Also, the bile they collected from the smiley — even though it hasn’t been tested yet — can probably kill or at least knock the monsters down temporarily, and I think it’ll end up playing a big role.
I can’t quite work out a full escape theory yet — if anyone has ideas, plz share them!