Jewel's demon

is the incredibly powerful dragon yōkai residing in the Shikon no Tama, and from his spirit was born the evil called Magatsuhi. In the epilogue, after Naraku's death, he became the ultimate enemy of Inuyasha inside the jewel, because he had always manipulate the main antagonist.

Origins
He was the unnamed and monstrous dragon demon who fought and died with the ancient priestess Midoriko hundreds of years before the events of the series, during the Heian Period of Japan, when the shoguns served as de facto rulers over most of Japan.

In the manga, but not in the anime, he was created when many minor yōkai possessed a mortal man who secretly desired Midoriko and formed into one demon in order to kill her, similar to how Onigumo loved Kikyō and created Naraku.

However, unlike to Naraku, he was not an hanyō but a full demon completely devoid of human feelings. In fact, while Onigumo's deadly body was completely devoured by demons and his evil soul used as their adhesive, the human who loved Midoriko was only incorporated on the base of the dragon's neck, where you can see only his head and right hand.

Defeat & Death
The final battle lasted for seven days and nights and eventually he captured Midoriko in his jaws. Midoriko, in one final attempt to defeat him, pulled his soul into her body, fusing it with her own soul, and then expelled them both simultaneously along with her heart.

Both the demon and Midoriko died, but their souls combined to give birth to the Shikon no Tama. Midoriko and he remained imprisoned within the Jewel and continued their battle.

During the story
He was first seen in the mummified corpse of an unnamed but massive demon. The souls of the demons that formed him appear from the Shikon Jewel when a fragment of it gets near his stone body, attempting to escape and revive. Kirara transformed to fight them, but he was wrapped by his tail around Kirara and attempted to kill her before Inuyasha fought him off. He remained inside the Jewel for the time being.

Inside the Shikon Jewel
During the final battle, after the spirits of Magatsuhi and Naraku were destroyed forever from the material world by Sesshōmaru and Kagome, he was still connected to the Sacred Jewel, and his spirit was still in combat with Midoriko inside the Jewel, like how Naraku was in control of the demons that made up his body.

Inuyasha inadvertently dived into the Jewel and encountered the giant dragon-like demon. Inuyasha sliced him immediately with the Wind Scar, and he was split into the many minor demons that formed him, because he is protected by the evil of the jewel.

The demons informed Inuyasha did not need to keep searching for Kagome since she would be in the Jewel soon enough. They also stated that if Kagome were to make a selfish wish on the Shikon Jewel, she would replace Midoriko in the eternal fight in the Jewel and Naraku would replace them.

In the manga, but not in the anime, his wish made by Naraku dissolved forever Midoriko's soul in order to prepare the place for Kagome.

Final Death
Inuyasha refused to believe him, and proceeded to attack the demons that formed him in an attempt to reach Kagome in the Meidō outside the Jewel and save her. Then, after Midoriko's final death in the manga, Inuyasha became her true successor in the ancient fight against the demon.

In the manga, he was destroyed forever by Inuyasha when he cut the point of light in the darkness inside the Shikon Jewel with Meidō Zangetsuha, which was the key to destroy the jewel's evil. In fact, with Inuyasha's attack at this very point, the purity of the Jewel called Naohi annihilated forever the evil corrupting presence within it, then the Jewel's shimmering and voice completely stopped.

Instead, in the anime version, when Kagome made the right wish, the demons that form him were enveloped in light.

Physical description
He is an amalgamation of minor demons forming an oriental sort of dragon.

Powers & Abilities

 * Immortality: As being the demon spirit residing within the Shikon Jewel, he is virtually immune to all forms of physical damage. This only sent him back into the evil of the jewel, and thus in the manga his spirit was only finally destroyed when Inuyasha cuts with Meidō Zangetsuha the point of light in the darkness inside the jewel, which is the key to destroy the jewelry evil. In fact, with Inuyasha's attack at this very point, the purity of the Jewel called Naohi annihilates forever the evil corrupting presence within it, then the Jewel's shimmering and voice completely stopped. Instead, in the anime version, he is destroyed forever when Kagome wished for the jewel to disappear forever which freed all the spirits trapped within it.
 * High-Speed Regeneration: He is able to regenerate within a matter of seconds, or become the several demons that he used to be, as demonstrated when Inuyasha attacks him with the Wind Scar in the final battle to save Kagome.

Enemies

 * Midoriko


 * Inuyasha
 * In the epilogue, after Naraku's death, Inuyasha became his ultimate enemy inside the jewel.

Allies

 * Naraku

Creation

 * Magatsuhi
 * Magatsuhi is the evil inside the jewel born from his spirit.

Trivia

 * The demon probably lived somewhere between 1203 and 1333 when the shoguns and their shikken regents were at the peak of their power.
 * If the Jewel of Four Souls is tainted by being held by an evil/greedy human or yōkai it turns a lurid black-violet, represented by Magatsuhi/Evil within the jewel, which means the powerful yōkai is winning over Midoriko and Naohi/Good.
 * It is revealed near the end of the series, that the Jewel's demon has been the true enemy of the entire story, manipulating Naraku was nothing more than an instrument he created to assure his continued existence.

Media appearances
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Manga

 * Chapter 89
 * Chapter 94
 * Chapter 375
 * Chapter 376
 * Chapter 377
 * Chapter 380
 * Chapter 555
 * Chapter 556
 * Chapter 557

Anime
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 * Episode 26
 * Episode 94
 * Episode 2 (FA)
 * Episode 25 (FA)
 * Episode 26 (FA)