Playing Kingdom Two Crowns for the first time can be a bit confusing, especially when it comes to figuring out how to upgrade things outside of the Wood phase of the building. This is where Stone comes into play.
Kingdom: How to Upgrade Walls and Towers to Stone – IGN Plays
Whenever you upgrade something with a handful of coins, sooner or later a Stone icon will appear above it, indicating that you need to find another source to unlock the ability to upgrade your fort or defenses a step further. You’d be remiss if you didn’t think there was a way to find Stone on the island you start on, but it’s nowhere to be found.
To upgrade your buildings with Stone in Kingdom Two Crowns, you'll need to find a Stone Mine. There is no Stone Mine on the first starting island you begin on, and instead you'll need to complete a series of other tasks before you can find one.
First go left until you find an abandoned ship. You need to repair the ship with your gold coins and leave the first island. You can explore the first island as much as you want, but you won't be able to do much on all the islands until you find various resources that only appear on others.