Crystal in end of pommell acts as Aura of Protection around the wearer. Giving him/her a +3 bonus to AC and Saving Throws.
Diamond-shaped Opal set in the T-Guard protects the weilder from all forms of attack by Breath Weapons from all Dragons and Dragon-kin.
Dragon-head shapes at end of cross-guards allow the wielder to speak to and understand any Dragon or Dragon-kin.
The "eye" near the crystal will Teleport Without Error the blade to the current wielder any distance if the weilder is threatened. It also grants the ability to Fly, as per the spell, for 2d6 turns per day.
While in posession of Dragon Knife, no dragon or Dragon-kin will attack the weilder unless the weilder attacks them first, or threatens the Dragon.
Also, the wielder gains a 35% Magic resistance as long as the blade remains on the wielders person.
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