Iskat's dagger is a long lost artefact that belonged to Iskat, the mightiest alńy ever existed. Iskat used the dagger to carve runes and to cast magic in combat. They optimised its functioning with multiple runes and magical sigils. According to a folkloric tale spread in several areas, when Iskat disappeared, they hid their most valuable tool in an unknown place, possibly near the Sword, where they are said to have first found it.
According to some legends, when Damparo killed his archnemesis Etrem, the Abyss absorbed the demon's corpse. Later, when the Abyss devoured the Dark Lands through the Dark Swan curse, the archdemon's remains returned on Nys, emerging as an inanimate magical object. Thus, the weapon is sometimes referred to as Etrem's Soul. Iskat would have found the dagger in the Sword by chance during their travels, making them an even powerful mage than they already were.
Mechanics & Inner Workings
What the dagger could or could not do has always been a matter of legends and speculations. No one ever, except Iskat themselves, had even a close look at the item. Nowadays, Odrzwak the Carver, the most knowledgeable Alńy when it comes to runes, is trying to collect stories about the dagger and analyze them to describe how it could work. As of now, she believes that either the item was much more powerful than any artefact she knows about, or the legends are greatly exaggerated. She propends on the second option. In one story, for instance, Iskat was able to shield a village from a quickly approaching horde of enraged spirits, by repeatedly casting protection runes around the whole palisade. Given the size of an average small village and the energy cost in casting a single protection rune, Odrzwak estimated the dagger could reduce the energy cost up to a tenth of the original. Considering that her own carving tool, with the same kind of energy amplification effect, only reduces the cost by half, she is convinced the story is not completely genuine. Nevertheless, there was surely a similar effect on the dagger too, possibly way more effective than anything Odrzwak could cast herself. This kind of incantation is a standard for any master carver's tool, after all. Analyzing other tales, she concluded the dagger had all of the sigils a carver wants for his rune-writing item, both common and rare ones. In particular, the most interesting ones are a stabilizing effect, to make writing runes faster, and a distance enhancement, to be able to write runes from afar. While the dagger's capacities are vastly overstated and often mixed and merged with its owner's, it was, for its origin, its enhancements or both, a truly magnificent rune carving tool and weapon.