Cybellin:
After you kill the Leto Lizardmen and Harit Lizardmen with that dagger, you must use the Blood Crystal to absorb their blood.
When you raise the purity of the crystal and return it to me, I shall give you a reward. The higher the level of purity, the greater your reward will be. There is an element of risk, however, as each time it is possible that the crystal will be destroyed.
You will find that certain grades of blood are useful and some grades have no effect at all on the Blood Crystal. This can only be determined by trial and error...