What was the dagger made of, and what happened to it? How does this connect to something we read earlier in the novel?

The dagger was made from the hair of the Sea Foam Spirits' sisters. According to the mermaid, she gave the dagger to a man who wanted to create the Wishing Spell and told him that he had to destroy it once he completed the spell. She then goes on to say that the dagger was not destroyed, but rather, it was thrown into a place where people put things they never want found again. This scene was foreshadowed when the children met the witch from Hansel and Gretel.