The Prose Edda 2.35

"Why is gold called Sif's Hair? Loki Laufeyarson, for mischief's sake, cut off all Sif's hair. But when Thor learned of this, he seized Loki, and would have broken every bone in him, had he not sworn to get the Black Elves to make Sif hair of gold, such that it would grow like other hair. After that, Loki went to those dwarves who are called Ívaldi's Sons; and they made the hair, and Skídbladnir also, and the spear which became Odin's possession, and was called Gungnir. Then Loki wagered his head with the dwarf called Brokkr that Brokkr's brother Sindri could not make three other precious things equal in virtue to these. Now when they came to the smithy, Sindri laid a pigskin in the hearth and bade Brokkr blow, and did not cease work until he took out of the hearth that which he had laid therein. But when he went out of the smithy, while the other dwarf was blowing, straightway a fly settled upon his hand and stung: yet he blew on as before, until the smith took the work out of the hearth; and it was a boar, with mane and bristles of gold. Next, he laid gold in the hearth and bade Brokkr blow and cease not from his blast until he should return. He went out; but again the fly came and settled on Brokkr's neck, and bit now half again as hard as before; yet he blew even until the smith took from the hearth that gold ring which is called Draupnir. Then Sindri laid iron in the hearth and bade him blow, saying that it would be spoiled if the blast failed. Straightway the fly settled between Brokkr's eyes and stung his eyelid, but when the blood fell into his eyes so that he could not see, then he clutched at it with his hand as swiftly as he could,—while the bellows grew flat,—and he swept the fly from him. Then the smith came thither and said that it had come near to spoiling all that was in the hearth. Then he took from the forge a hammer, put all the precious works into the hands of Brokkr his brother, and bade him go with them to Ásgard and claim the wager.

"Now when he and Loki brought forward the precious gifts, the Æsir sat down in the seats of judgment; and that verdict was to prevail which Odin, Thor, and Freyr should render. Then Loki gave Odin the spear Gungnir, and to Thor the hair which Sif was to have, and Skídbladnir to Freyr, and told the virtues of all these things: that the spear would never stop in its thrust; the hair would grow to the flesh as soon as it came upon Sif's head; and Skídbladnir would have a favoring breeze as soon as the sail was raised, in whatsoever direction it might go, but could be folded together like a napkin and be kept in Freyr's pouch if he so desired. Then Brokkr brought forward his gifts: he gave to Odin the ring, saying that eight rings of the same weight would drop from it every ninth night; to Freyr he gave the boar, saying that it could run through air and water better than any horse, and it could never become so dark with night or gloom of the Murky Regions that there should not be sufficient light where be went, such was the glow from its mane and bristles. Then he gave the hammer to Thor, and said that Thor might smite as hard as he desired, whatsoever might be before him, and the hammer would not fail; and if he threw it at anything, it would never miss, and never fly so far as not to return to his hand; and if be desired, he might keep it in his sark, it was so small; but indeed it was a flaw in the hammer that the fore-haft was somewhat short.

"This was their decision: that the hammer was best of all the precious works, and in it there was the greatest defence against the Rime-Giants; and they gave sentence, that the dwarf should have his wager. Then Loki offered to redeem his head, but the dwarf said that there was no chance of this. 'Take me, then,' quoth Loki; but when Brokkr would have laid hands on him, he was a long way off. Loki had with him those shoes with which he ran through air and over water. Then the dwarf prayed Thor to catch him, and Thor did so. Then the dwarf would have hewn off his head; but Loki said that he might have the head, but not the neck. So the dwarf took a thong and a knife, and would have bored a hole in Loki's lips and stitched his mouth together, but the knife did not cut. Then Brokkr said that it would be better if his brother's awl were there: and even as he named it, the awl was there, and pierced the lips. He stitched the lips together, and Loki ripped the thong out of the edges. That thong, with which Loki's mouth was sewn together, is called Vartari.