Grades of Basic Xeon correspond to different grades of items. Simple; Supernus; Eximus; Rare and Carus Basic Xeon are shown here.
Most Towns have a Forge Area where you can find several NPC Blacksmiths. They charge Lant for the services they perform and also require the Items and Xeons necessary for each attempt. Pay Items are available to Insure Items from loss due to failure, to restore failures, to reduce/reconstruct successes and to increase success chance.
Basic xeon are the fundamentals of the upgrading system and are required for most services from a Blacksmith NPC. Depending on the grade of the item you are upgrading the grade of basic xeon needed can be determined. Basic xeon can be acquired from looting drops from defeated NPC Monsters, from reducing reduction-able items, and occasionally from other sources.
Item Reduction is the way basic xeon can be acquired from items that say [Item Reductionable] in their descriptions. (Since the launch of Memento Mori basic xeon can be found in dropped loot from defeated NPC Monsters but Item Reduction is yet another way to get basic xeon.) Since basic xeon are used in almost every type of upgrade acquiring as many as you can is a good idea.
You may visit a forge and open a conversation with the Item Reduction Blacksmith NPC to open the Item Reduction UI. (This way of reducing items into basic xeon can get expensive, however a Pay Item called the Item Reduction Tool is available from the Item Mall which allows a Character to access the Item Reduction UI from anywhere and there is no fee in Lant when using the Pay Item to reduce items.)
Occasionally other items can be acquired from Item Reduction as well. Some items called Compression Xeon can drop from defeated NPC Monsters (especially in the Premium Dungeon) and some other Compression Xeon may also become available from time to time in the Item Mall as a part of an Event.
The Reinforcement Item UI opened in conversation with the Reinforcement Blacksmith NPC is used to increase an items reinforcement level many times (becoming more difficult each time and for higher level items. The three slots on the bottom are for Pay Items used to increase success chances and protect against the loss of failure.
The Enchanting Blacksmith is used to fill slots available in equipment with enchanting xeon. Depending on an items Enchanting Grade it may have anywhere from 1 slot to 10 slots available. Each attempt to fill a slot with an enchanting xeon becomes progressively more difficult. Beginning at 100%, then 90%, 70%, 50%, 30%, 20%, and any attempts after the sixth slot are at 10% chance to succeed. The enchanting xeon can be lost upon a failed attempt but the item you are upgrading cannot. Instead of losing an item on a failed attempt, one of the slots becomes un-usable until the failure is removed using a Pay Item from the Item Mall.
There are many different sorts of enchanting xeon to be found in-game. Some you can find dropped from any defeated NPC Monster but others are very rare and only available as a reward for a quest, a special event item, or dropped loot from a Raid Boss NPC Monster.
The Compound Blacksmith is used to upgrade basic xeon into a higher grade basic xeon using stacks of them as seen. Basic xeon may be compounded up to the Carus grade but the chances, again become lower and lower as the grade of xeon becomes higher and higher.