History of the Dwarves

In 2350 BD, The first 13 Dwarves awakened in the mountains of the north. They constructed homes in the rock, and were soon joined by rock gnomes who dug out from the mountain. Together, they learned how to build better shelters deeper into the mountains and forge crude weapons to hunt and protect themselves from monsters and giants. Some rock gnomes integrated into Dwarven society, while others ventured out into the world.
In 2200 BD, the Dwarves discovered gold, silver and gemstones deep within the mountain and constructed a mine. The first dwarfhold began construction around the mine to support their efforts and protect their discovery from giants.
In 2000 BD, The first dwarfhold of Khazad-Nogaak was completed and dedicated to Alviss, the Dwarven god of wisdom. The Dwarves had spread throughout the north, building outposts high in the mountains. Curious about their new neighbors, the elves visited Khazad-Nogaak and brought the Dwarves many fine crafts of wood, bone, leather and cloth (as well as the secret of brewing ales and wines, which the dwarves were extremely fond of). The Dwarves in turn taught the elves how to forge steel, and trade was established between the two peoples.
In 1920 BD, mithril was discovered in the eastern mountains of the north. The Dwarves set about constructing a dwarfhold around it.
In 1850 BD, the second dwarfhold of Kal-Kadred was completed and dedicated to Grimni, the dwarven god of war and battle. This "city of forges" would become the source of most of the Dwarves' armor and weapons. The elves were particularly fond of Mithril and trade with Kal-Kadred flourished.
In 1650 BD, the orcs arrived in the north and began attacking dwarven outposts from the surface and from tunnels in the great below. The forces of Kal-Kadred rallied against them, but the elves refused to answer their call to war. Trade with the elves ended, and relations between the two peoples soured. Kal-Kadred became the defacto military capital of the Dwarves, defending the north from the orc threat and allowing Khazad-Nogaak to continue in relative peace. They would continue to battle orcs, giants and monsters unaided for centuries.
Around 800 BD, the Dwarves first encountered primitive men living in small hunting and fishing villages in the foothills of the world's end mountains. The northmen proved themselves capable in battle, and soon joined the Dwarves in their efforts to drive the orcs from the north. The northmen traded furs, meat and other surface goods for the weapons, armor and jewelry crafted in the forges of Kal-Kadred. In the west, the Dwarves of Khazad-Nogaak provided the northmen with jewels and precious metals in return for keeping the mountains safe from monsters and giants.
In 650 BD, the Dwarves traveled east across the world's end mountains until they reached the end of the mountain range, where they began construction on a dwarfhold called Khaldurak. Construction was never completed, and the dwarven expedition to the east disappeared without a trace. Many dwarves since then have attempted to find the lost dwarfhold of Khaldurak, but none have ever found it. Some believe the mountain it was built upon was cursed and swallowed it whole, while other more sensible dwarves believe it sunk into the depths of the great below.
In 500 BD, the Dwarves ventured south into the greatwood via tunnels in the great below. Throughout the journey, the explorers felt as though they were being watched. They settled in central Arlyss, constructing a small dwarfhold beneath the hills after discovering rich veins of gold and silver. The name of this dwarfhold is lost to time, but they endured constant attacks from dark elves, duergar and monstrous aberrations of the deep. A small group of Dwarves abandoned this hold and ventured further south, establishing a dwarfhold in the mountains of Karak Kadre. This would come to be known as Kal'Ein and was dedicated to Úri, the dwarven god of craft. With the three dwarfholds constructed and prospering, the Dwarves took it as an omen from their gods and decided never to build another dwarfhold, instead focusing on the prosperity of the three holds.
As the doom of Sydonia blanketed the skies in smoke, hordes of dragons arrived in Arlyss. The Dwarves of the north immediately clashed with the white dragons who settled there (with the help of northmen tribes), and the burgeoning dwarfhold of Kal'ein in the south was forced to defend itself against red dragons for the first time. The lost dwarfhold of central Arlyss was never heard from again, and no one dared venture near it. Castle dragonwatch was built from the ruins of its collapsed surface entrance, and served as a command center throughout the war before becoming the capital city of New Sydonia.
In the first few centuries after the Doom, Dwarves began to leave their dwarfholds to explore the world. Some sought work as dragon slayers and mercenaries, while others merely ventured out as explorers and adventurers. These Dwarves would integrate into Sydonian society as it expanded, and became known as "hill Dwarves" to differentiate them from "mountain Dwarves." They were generally fairer of skin and preferred shorter beards and hair (some having none at all).
The Dwarves of Kal'Ein supported the men of Sydonia and the Elves in their war against the dragons by supplying arms and armor, as well as refuge for those unable to fight. The northern dwarf kingdoms were too busy battling orcs and dragons to join the war in the south. In 121 AD, a massive red dragon named Thraxitus nearly penetrated the walls of Kal'Ein with an army of kobold sappers, but was slain by a Sydonian captain named Avron Redbane (who died from his wounds after the battle). The Dwarves constructed a statue of Captain Avron that still watches over the gates of the city.
In the centuries following the defeat of the dragons, the Dwarves of Kal'Ein continued to trade with the Sydonians and the elves and took no part in the conflicts between the two. Trade between Kal'Ein and Sydonia flourished. The northern kingdoms continued their endless struggle against the orcs and monsters of the north, and eventually established trade with Arlenport. In 930 AD, a massive orc horde invaded Sydonia and sacked the town of Blighthaven. The Sydonians retaliated by allying with the Dwarves of Kal-Kadred, creating an alliance that would last into modernity. The orcs were repelled by the alliance, and though they would continue to harass the northern kingdoms they would never again threaten Arlyss in any meaningful way. The Sydonians founded the order of the mark, headquartered in an old dwarven watchtower (now known as the last bastion) on the border of Sydonia, the north and the badlands.
As black powder and artifice developed in Sydonia in the last few centuries, the Dwarves of Kal'Ein were quick to adopt the new craft. Their riflemen and cannoneers came to be among the best in Arlyss, and firearms from Kal'Ein came to be known as the finest in the world. The northern kingdoms were slow to adapt to this new technology, and still prefer traditional arms. Today, Khazad-Nogaak serves as the cultural and spiritual capital of the Dwarves. Ancient records dating back to the awakening of the Dwarves are kept in massive libraries and maintained by an army of scholars. Meanwhile, Kal-Kadred still serves as the shield that protects the realms of men (and Dwarves) from the orc hordes of the east and the giants of the north. Trade with Kal'Ein is at an all-time high, with caravans from the lonely city traveling to southport and beyond daily.