There are two methods to start an Island challenge: you can press the ' +' button on your dashboard at the bottom, once pressed, at the right you will find the lightning symbol, which indicates that you have the possibility to start an Island challenges; you can also start a challenge from the settings of your Island by pressing the settings wheel at the top right of your Island homepage.
No, it is not possible.
Island challenges can only be initiated by Island administrators.
No, Island challenges do not include any prize, unless the administrator decides to reward the most beautiful post (for example with one or more Superlikes).
It is not possible to delete a challenge of the Island.