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Also known as the Legendary item in chat box announcement, a Blood Diamond is the fifth tier out of 6 available gems and can be used to craft a Blood Key with, which can open a chest with four loot slots.

The loot acquired will be three random orbs of each type (blue, green, red) and an Empty Orb with the same color as the chest. Pirate Potions are not required to be able to get this empty orb.

Using a blood key to open a chest will consume the key but NOT the chest.

Chest Slot 1

Slot 2

Slot 3

Slot 4

TreasureChest EmptyBlueOrb A random Blue Orb A random Green Orb A random Red Orb
GreenTreasureChest EmptyGreenOrb A random Blue Orb A random Green Orb A random Red Orb
RedTreasureChest EmptyRedOrb A random Blue Orb A random Green Orb A random Red Orb

The Blood Diamond also can be used to impress the Vendor, with an immediate chance of success, which means he will let you complete the quest without showing the 4 otherwise required items.

Gems Diamond

Standard Gems
Sapphire Sapphire - Emerald Emerald - Ruby Ruby - Diamond Diamond
Special Gems
Blood Diamond BloodDiamond - Dark Diamond DarkDiamond