The baby blue dragon bone is an item on the Odd Old Man's wish list during Rag and Bone Man II. It is dropped by baby blue dragons. After the quest is completed you can still obtain this as a drop. The bone must be put into a pot of vinegar and boiled to create a polished baby dragon bone before giving it to the Odd Old Man.
Monster Combat level Quantity Rarity Baby blue dragon 48 1 Common