Merlin is looking for you to talk about an important topic.
He wants to investigate a strange crystal he found in the Forest of Valor. He thinks it might be connected to Donald Duck's adventures in the Dark Grove.
After examining another one of these crystals, he calls them Night Shards and asks you to look for more.
Suspecting that Night Shards are just corrupted forms of Dream Shards, he suggests you experiment with them.
You manage to purify a Night Shard.
Merlin encourages you to give the new Purified Night Shard as a gift to any Villager.
Once there, a Mysterious Shard will be on the ground not far from where the portal was during Lost in the Dark Grove, along the very southern edge of the forest. The shard will begin to sparkle while it's close.
Pick the shard up and give it to Merlin.
Dialogue
Ah, another of these Night Shards. Oh, but this one is bigger.
Hmm... You should search the Village for more Night Shards. I'm sure there are additional ones buried about.
Afterwards, gather 5 Night Shards. These can be acquired by digging up the ground or clearing Night Thorns.
Once 5 Night Shards have been obtained, speak with Merlin again.
Dialogue
Try purifying these Night Shards with a Dream Shard at your Crafting Station.
Now, while you were collecting these, I further investigated the large Night Shard.
It reacts strongly to Dreamlight Magic. In fact, I believe it was once Dreamlight...
...which has somehow been corrupted and twisted by darkness.
We may be able to use Dreamlight to purify all of them.
Try combining the Night Shards with a Dream Shard at your Crafting Station.