The Chaos Crystal is obtained by beating the spider boss which can be found on the last level of the spider lair. The entrance to the spider lair is on depth 5 where Goo is found.
The Chaos Crystal, when identified, has a 0/100 counter that charges up as the Hero/ine takes damage.
The Chaos Crystal must be equipped in a ring slot in order to charge.
When identified twice, and charged to at least 50 it can be fused with Weapon, Bow, Staff or Scroll.