When the bridge was finished, the gods wanted to rescue Freyja from the giants, but the giants demanded a suitable ransom: the treasure which the Nibelung dwarves hoarded with the Rhine gold.  And so the gods were forced to steal the dwarves' treasure and hand it over to the giants, who hoarded it in a cave guarded by the dragon Fafnir.

Mimi, one of the dwarves, was desperate, for the dwarves could do nothing against the dragon.  When he learned that Sigmund, King and hero of the Volsung, had died in battle, he decided to take charge of the now fatherless little Prince Siegfried and turn him into a warrior as brave and strong as the deceased king.  The dwarf became the prince's tutor, with the intention of getting him to steal the treasure guarded by the dragon.

When Siegfried reached the age of eighteen, Mimi gave him the broken fragments of his father's sword, the magic Gram, and taught him how to forge the sword anew.  When the sword was whole again, the dwarf told Siegfried about the dragon Fafnir, but not about the treasure

'It would be a great exploit, young Siegfried, if a prince as strong and brave as you succeeded in kill the dragon', said Mimi, to entice him.  The bold Siegfried agreed to undertake this task and lost no time in making his way to the dragon's cave.  On arriving at the monster's lair, he called him loudly.

Fafnir awoke and came out, intending to devour the thoughtless intruder. Fearlessly, the hero brandished the magic Gram and withstood the attack, and when the dragon reared him enormous head, he plunged the sword into the beast's neck.  Mortally wounded in the jugular, the beast collapsed in a pool of blood, and a few drops splashed Siegfried's lips, giving him the wonderful faculty of understanding the language of the birds:

'Here's young Siegfried who has just killed the dragon.  If he were to bathe in the monster's blood, he would become invulnerable', sang some birds.  'He is not as clever as he seems if he doesn't realize that Mimi will betray him.  The dwarf only wanted the treasure that Fafnir was guarding and now that the dragon is dead, he will kill Siegfried', cheeped others.

The young man followed the birds' advice and bathed in the dragon's blood.  From then on he was invulnerable.  However, a lime leaf fell on his shoulder while he was bathing, and this tiny little patch of his body was not protected by the magic blood.

Then, Siegfried kill the artful Mimi, who only wanted the treasure, and went into the dragon's cave.  The hero, whom the birds continued to advise, kept the magic helmet of invisibility and the dwarf's ring, which he found among the precious objects in the cave.  After this exploit, he sheathed the powerful Gram and set off in search of new adventures.