Loki was a very mischievous person. One day he snuck in to Thor's wife Sif, and while she slept, he cut off her golden hair.
When Thor found out, he became very angry, and when he discovered that Loki was the culprit, he threatened to crush every bone in his body. Loki was obviously scared and promised to get Sif some other hair that was just as nice and grew just as well. He went to some talented dwarf friends who made new gold hair for Sif. The dwarf also made the ship Skibladner, which always had a tailwind and could be folded so that you could take it with you in your pocket. Eventually he created the spear Gungner, it always hit the spot when it was thrown.
See a copy of an archeological find that tells about Skibladner
On the way home, Loki met another dwarf, Brok, and showed her things. Brok believed his brother could make art even better. They bet on it, and Loki put his head down as collateral.
When he heard what it was all about, Sindre immediately started forging. He put a pigskin on the blacksmith and ordered Brok to blow with the bellows.
Loki, standing and watching, became afraid that the venture would succeed, and turned into a fly that stung Brok on the hand.
Brok did not allow himself to be disturbed, however, and Sindre was soon finished with the first thing, a pig with golden hair and bristles that could run faster than a horse while its bristles shone.
Now Sindre put some gold on the blacksmith, and Brok blew on. Loki again tried to disturb Brok in the form of a fly and stabbed him in the neck, but Brok continued to blow.
This time Sindre made a gold ring, which was later called Drøpner. Every ninth night, eight other rings dripped from it, all as beautiful as itself.
Eventually Sindre chose some iron, and Loki stabbed Brok in the forehead, so that blood ran down his eyes. Hernia blwev need to drop the bellows to wipe the blood away.
Sindre had made a hammer, but the shaft had become a little short.
The hammer was later called Mjølner. It always hit the spot and always came back when thrown.
Loki and the two dwarves now went to Asgård to settle the bet. Odin, Thor and Frej became the judges. Loki gave Odin the spear that always hit the spot. Thor got the golden hair he gave to his wife Sif, and Frey got the strange ship. Everyone now thought that Loki would win, but then Sindre and Brok took their stuff out. Odin got the ring. Frey the pig and Thor the hammer.
After these gifts, the gods judged that the dwarves had won. Loki now had to get rid of his head, but smart as he was, he said: "Just take my head, but you must not touch my neck, because it is my own". Brok became so angry that he took a needle and sewed Loki's mouth together. It was very difficult for Loki to get his mouth up again.
Year and peace.