At caves level 10, go back to town and talk with Griswold. He will say something about a magic anvil that contains demonkind magic on it, however, that was just a legend that was told to him. But he will ask you to check it, and, if is true, maybe he can get something for you as a reward.
Backtrack to level 10 and search for the anvil, it will be somewhere here. Take care though, as a rather nasty Unique Obsidion Lord called Blackstorm tends to show up on this dungeon level more often than not. The anvil is usually on an island-like area surrounded by lava. When you find it, back to town and hand it to Griswold. He will be amazed, the legend was true. As a reward for you, he will make you - using the anvil's magic - the unique item: Griswold's Edge, that is very powerful.