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The Whimsical Essence is a quest item needed for the quest Toy Story. The Whimsical Essence is dropped by the Whimsical Djinn in Plains of Jarin once killed, and must be delivered to Mahk in Kamadan, Jewel of Istan in order to infuse it with the Broken Toy. This is the second objective in completing the quest needed to obtain the Miniature Gray Giant miniature.
Like most quest items, the Whimsical Essence has no value if you try to sell them to merchants and cannot be salvaged.