The Eye of the Demon is an essence gem which grants a large bonus to all three ability scores (Body, Mind, and Spirit). It also provides players with the Demon Skin effect, which grants a 5% chance that when players are hit, the attacker will be damaged. It is only usable by followers of the Way of the Closed Fist, with followers of the Way of the Open Palm having a similar gem called The Eye of the Dragon instead. The two gems are jointly the pinnacle of a series of similar gems, the next highest being the alignment-neutral Scintillating Gem of Power.
It can be found by Closed Fist players in Dirge's Gem Repository (in the western portion of the Outer Courtyard).
In-game description: "Rumored to be the eye of a great demon lord who fell from his place in the Celestial Bureaucracy, this great gem channels its wearer's dark intentions into an immense inner power, fueling the wielder's dark deeds from within."