Dream Nail

Function
Hold down DREAM NAIL to charge and swing the Dream Nail. This can perform several functions: The Dream Wielder charm, granted by the Seer after collecting 500 Essence, greatly reduces the charge time of the Dream Nail and doubles the SOUL gained from hitting living enemies (from 33% to 66%).
 * Extract Essence from Ghosts
 * Collect SOUL from living Enemies (33% meter)
 * Challenge Dream Warriors
 * Challenge Dream Bosses
 * Enter the minds of Dreamers
 * Read the minds of NPCs and some bug corpses

How to Acquire
The Dream Nail is acquired in the Resting Grounds by inspecting the Dreamer Statues. Doing so will send the player into a dream where they will receive the Dream Nail from a Moth.

Essence
Essence is the energy gained from multiple sources after obtaining the Dream Nail. After obtaining certain amounts of Essence, the player can return to the Seer for rewards. There is 2608 obtainable Essence total in the game.

Essence Sources

 * Using Dream Nail on a Ghost
 * Collecting Essence spawned by a Whispering Root
 * Defeating a Dream Warrior
 * Defeating a Dream Boss

Essence rewards from the Seer

 * 100 Essence - Hallownest Seal
 * 200 Essence - Spirit's Glade opens
 * 300 Essence - Pale Ore
 * 500 Essence - Dream Wielder Charm
 * 700 Essence - Vessel Fragment
 * 1000 Essence - Arcane Egg
 * 1300 Essence - Mask Shard
 * 1800 Essence - Awakening the Dream Nail, allowing entrance to the White Palace
 * 2400 Essence - Ascension Achievement

Trivia

 * It is not necessary to use the Dream Nail on passive Ghosts to fully awaken the Dream Nail
 * It is unknown whether or not Ghosts are the bug's spirit, a lingering spectre, an imprinted memory, or some other form.