The Dragonblade is a sword crafted by the Blacksmith for a fee of 500 gold, it's offered by him after the dragon comes and either takes some gold, or lives, it'll then lay useless for quite a while until either the Knight or Sneaky Girl comes to get it, you should choose the Knight because he'll give you the full bounty, which is 500 gold and 25 happiness, whereas if you choose the Sneaky Girl, she'll only give you 250 gold and keep the other half.