The dwarfs were created by the gods from Ymir's tiny bones. The first was Modsognir, another Durin. They wandered deeper into the lohows stretching under the mountains. There they established the first forges and made other dwarfs from clay, in the image of humans. The gods gave them the power of creation for this time. The Song calls them the Grandfathers. Some time later, Dwalin was born in the Lofarf family. He led part of the tribe to the bright world and settled near the sea.
The midgets were very skillful, wise and hardworking. Blacksmithing is their favorite, mining and jewelery. No one, just like them, he could not work iron, gold or silver. They often used magic at work, as a result, the items coming out of their workshops acquired unusual properties and special beauty. They valued wealth, making love to trinkets and precious stones.
Usually they did not harm people. The outside world was indifferent to them. However, they could be vindictive and deceitful, especially when they are overcome with lust for wealth. They could go as far as murder to get the desired treasure. They gave the world a love of beautiful objects and the skill of a craftsman.
The midgets have taught people, how to extract ore, melt them and work into shiny metal, harden steel and cast spells on blades. The gods used their services frequently, but otherwise they showed no special interest in their affairs. The song does not mention this, for the midgets to play a role on the day of the Final Battle. It is also unknown, will they be reborn, when the world is born again.