AN: So, this is basically a novel study project that got way out of hand. Like 3000 words out of hand. I figured I could post it and see if I should continue it or not. So if you like it say something, leave a comment, favorite, follow, whatever you like. If you show interest I will post more!
FYI this is basically just back story, the story gets moving in the next chapter.
Aulë, creator of dwarves, had a daughter named Phaedra, with Varda the Queen of Stars, wife of Manwë. Phaedra was beautiful, alike to her mother in that way. Varda was like the stars she had created, an untouchable beauty. Phaedra was brilliant as the Moon, cool and serene. Melkor saw her beauty and desired to possess the young goddess as he had tried to do with her mother. When Phaedra denied his proposal of marriage the first dark lord turned her into a glorious gem, made of a thousand facets, a jewel that radiated light from within.
Melkor hid her within the depths of a mountain that would come to be known as Erebor, The Lonely Mountain. Aulë searched for Phaedra in fruitlessly, unfortunately it became easier for the Valar to deny the existence of the goddess rather than search for her. So she remained locked away, fully conscious in total darkness for eons. Eventually the isolation corrupted her and Phaedra fell into madness.
Her mind sought out anything living, trying to break free of her restraints. Unconsciously she drew her father's creatures to her, and nearly possessed with need the dwarves mined into Erebor. They mined into depths that should have never been unearthed in vain until under the reign of Thror, King under the Mountain, she was found. Phaedra glowed in a radiance that rivaled the moon. She called the dwarves to her in hopes that they'd break her imprisonment but they didn't realize what they had found was a goddess and merely thought of her as a jewel they called the Arkenstone.
She kept screaming, calling, seeking out someone, anyone to break her prison and release her into her true form. It drew elves, dwarves, and all sorts of strange creatures. Then after hundreds of years of watching and waiting a type of creature she had never seen before flew from the west. A young dragon named Smaug heard her call and traveled from the west to desolate Dale, drive out the Dwarves from Erebor, and hoard the treasure for himself.
Thror attempted to escape Smaug's wrath with the Arkenstone, but was burned alive clutching the incandescent gem with his charred fingers. A few decades later an idiotic man broke into Smaug's lair in an attempt to steal the Arkenstone. The man nearly succeeded but he was caught running down the mountainside. The fire-drake devoured him alive dripping just enough of the man's life-blood on to the Arkenstone. There was flash of blinding white light and in the place of the Arkenstone was the goddess Phaedra.