The blade is made of the tibia of a dead nightkin. It's a special enchantment that's attached to the blade's wearer's mind. This means that if the blade were made of steel it could still pierce through the nightkin's armor, even if it were made from a human body. This is why the blade can't stab the guy. The nightkin says that the blade is as tough as a "upper-tier" weapon, which is why it's so hard to pierce through his armor's defenses. He wants to know if the demons sent him, but he doesn't want to tell. He says that he's raised like a suicide warrior, and that even if he succeeds or fails, he'll die at the hands of the demons. He asks if he can teach him how to camouflage his appearance, and he says yes. He's willing to let him go if he teaches him how. He tells him that killing him won't help his mission, but killing the nightkins will do nothing for him. The only thing that matters to him is that no one can master this technique, but nightkins are the only ones who can