Your stronghold (e.g. Castle) must be at level 5 or higher to build an Alchemy Core. The Alchemy Core has the following two functions:
1. You can transmute existing equipment and get a random new piece of equipment of similar type. This also produces Alchemy Stones.
2. You can craft equipment. To craft a piece of equipment you will first need to unlock its Design. Crafting equipment expends Hero Energy and Alchemy Stones.