Bilbo Gives the Arkenstone to Bard
Bilbo Baggins, the hobbit burglar of Thorin and Company, had carried a dangerous secret through the weary days of the siege. Thorin, consumed by the dragon-sickness, had commanded his dwarves to search every corner of the hoard for the Arkenstone of Thrain, the great white gem he valued above a river of gold, and swore vengeance on anyone who found it and withheld it. Bilbo, who had discovered the jewel during his first exploration of the treasure hall and hidden it in an old bundle he used as a pillow, heard these words and grew afraid. Yet as the siege dragged on and the prospect of battle between dwarves, men, and elves loomed, a plan began to form in his mind.
The Secret Departure
One moonless night, Bilbo made his decision. He crept to a corner of an inner chamber, drew out a rope and the Arkenstone wrapped in a rag, then climbed to the top of the wall. Only Bombur was on watch, and Bilbo persuaded the weary dwarf to let him take the shift, promising to wake him at midnight. As soon as Bombur had gone, Bilbo put on his ring, fastened his rope, slipped down over the wall, and vanished into the darkness. He crossed the stream with difficulty, falling into the cold water and alerting elven sentinels, but he revealed himself and demanded to be taken to Bard and the Elvenking, insisting he had only an hour or two to spare.
The Offer to the Enemy
Brought before a fire in front of a large tent, Bilbo sat with Bard and the Elvenking and spoke in his best business manner. He declared himself tired of the whole affair, produced Thorin's old letter guaranteeing him a fourteenth share, and warned them that Dain and five hundred grim dwarves from the Iron Hills were less than two days' march away. Then he drew forth the Arkenstone and threw away the wrapping. The Elvenking stood up in amazement; even Bard gazed marvelling at the gem, which seemed like a globe filled with moonlight hung in a net woven of frosty stars. Bilbo explained that the stone was the heart of Thorin, worth more to him than a river of gold, and that he was giving it to them to aid their bargaining. When Bard asked how it was his to give, Bilbo replied uncomfortably that it wasn't exactly his, but he was willing to let it stand against all his claim, adding, "I may be a burglar—or so they say: personally I never really felt like one—but I am an honest one, I hope, more or less."
The Consequences of the Gift
The Elvenking looked at Bilbo with new wonder, declaring him more worthy to wear the armour of elf-princes than many who looked more comely in it, and advised him to remain with them. But Bilbo refused, saying he could not leave his friends after all they had gone through together, and that he had promised to wake old Bombur at midnight. As he was escorted back through the camp, an old man wrapped in a dark cloak rose from a tent door and clapped him on the back: it was Gandalf, who praised him and told him things were drawing towards an end. Bilbo returned to the Gate, climbed back up his rope, and sat on the wall wondering anxiously what would happen next. The next day, when Bard and the Elvenking brought the Arkenstone before the Gate, Thorin was stricken dumb with amazement and confusion, then burst into rage, seizing Bilbo and shaking him like a rabbit. Only Gandalf's intervention saved the hobbit from being thrown to the rocks. Thorin, though forced to bargain, declared Bilbo a traitor and cast him out, and the rift between them seemed absolute—yet the stone had changed the balance of power and set the stage for the final confrontation.
