Kyrnil Long-Nose, a legendary Harbinger from the Second Era, began the tradition of trusted advisors called "The Circle," which was named after Ysgramor's council of captains. Its purpose was to serve as an example to the younger, newer Companions.
Over time, the purpose of the Circle was somewhat subverted, and it evolved to become a group where all members were secretly Werewolves.
According to Kodlak Whitemane's journal, a previous Harbinger called Terrfyg was the one responsible for introducing the Companions to Lycanthropy. Terrfyg originally made a pact with the Glenmoril Witches that stated that if the Companions hunted in the name of their lord, Hircine, they would be granted great power. They had not believed the change to be permanent, so the Companions were deceived.
Kodlak and Vilkas view the beastblood as a curse and strives to cure themselves. However, Skjor and Aela the Huntress view it as a blessing, and therefore the tradition has been maintained, much to Kodlak's distaste.
After Kodlak's death and subsequent curing of his Lycanthropy, Vilkas and his twin brother, Farkas, desire to be cured of the beastblood, so that they may not be taken by Hircine to his hunting grounds after their deaths.
The hunting group called the Silver Hand are the enemies of the Circle, as their profession lies in hunting down werewolves with silver-made weapons. They are aware that the Circle is made up of lycanthropes, and for that, they hunt and attempt to kill any member of The Circle. They manage to kill Skjor while he was scouting out one of their camps.
The Circle meets at the Underforge (inaccessible until the Dragonborn has the option to join the Circle), which is a small cave-like room underneath the Skyforge. The Underforge has a stone bowl in the center of the room, which The Circle uses to introduce the beastblood to new members. A small tunnel leads out of the Underforge to a farm outside of Whiterun. The Totems of Hircine are also found here after collecting them.
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