They were originally bred by Morgoth during the First Age to serve as powerful war beasts. The first dragon ever seen in Middle-earth was Glaurung, titled as the Great Worm and the Father of Dragons, whom Morgoth used to great effect during the fourth and fifth battles in the War of the Great Jewels.
That title falls to Ancalagon the Black, the largest dragon ever to have existed in Middle-earth. He was bred by Morgoth during the First Age to fight for the Dark Lord during his campaign of terror.
Morgoth didn't create inanimate objects like rings of power, but he was the one that originally filled Middle-earth with evil. Using his power, Morgoth corrupted a group of Maia and turned them into demonic Balrogs. He also created Orcs by perverting Elves, and he made Trolls by tainting Ents.
In The Fall of Gondolin Morgoth made them of slime by sorcery, "bred from the heats and slimes of the earth". Or, they were "beasts of humanized shape", possibly, Tolkien wrote, Elves mated with beasts, and later Men.
Glaurung, Ancalagon, & the Dragons of The Silmarillion | Tolkien Explained
How many Balrogs did Morgoth create?
The Balrogs, or Valaraukar (singular Valarauko, Quenya for "Demon of power"), were three to seven Maiar seduced and corrupted by Morgoth into his service, turning into dreadful Úmaiar and scourges of fire cloaked in shadow.
Morgoth created an unknown number of dragons, first the non-winged variety and then later the winged ones, and they had their own progeny from that point forth and became a race in their own right. Nobody ever went out and counted them, though their numbers were said to be greatly diminished in the Third Age.
Morgoth, the evil Vala, created trolls in the First Age of Middle-earth. They were strong and vicious but stupid; as in The Hobbit, they turned to stone in sunlight.
Glaurung was the first of the dragons and one of the foremost lieutenants of Morgoth during the First Age. He had four legs, and a fiery breath, but no wings and could not fly.
It was said that Morgoth hated and feared the House of Fingolfin the most of the three Houses of the sons of Finwe, and he feared most Fingolfin's son Turgon, as it was prophesised that from the House of Turgon would his doom come.
Like the devil, Morgoth was one of the first children created by the God of Tolkien's world, but succumbed to jealousy and greed, especially over the creation of other races, and was duly disowned by his fellow Valar.
Bred by Morgoth in the depths of his fortress of Angband, Ancalagon is present at the last battle of the First Age, which sees the battle between the armies of the Valar and Morgoth to free Middle-earth from the latter's yoke.
They were originally bred by Morgoth during the First Age to serve as powerful war beasts. The first dragon ever seen in Middle-earth was Glaurung, titled as the Great Worm and the Father of Dragons, whom Morgoth used to great effect during the fourth and fifth battles in the War of the Great Jewels.
But there other dragons in Tolkien's lore that get barely any attention at all. While Smaug is certainly a large figure in Middle-earth's history, he is not the only dragon of importance. Dragons are intelligent, powerful beasts that predate many of Tolkien's creatures that audiences are more familiar with.
The first Dark Lord was the rebel Vala first known as Melkor and then as Morgoth. Denied the demiurgic power he desired, he was consumed by a nihilistic purpose: the destruction of Middle-earth. The second Dark Lord was Morgoth's successor, the subversive Maia named Mairon, and later Sauron.
Before the rise of Sauron, the land of Mordor was known as the Southlands and the Plateau of Gorgoroth was inhabited by Men who called themselves Southlanders. These Men had built countless settlements.
The Balrogs were Maiar corrupted by Morgoth during the creation of Arda, who cloaked themselves in shadow and flame and carried whips and swords. Famed Balrogs include Gothmog, slain by Ecthelion, and Durin's Bane, slain by Gandalf.
Described as a "long-worm", although this imprecise term seems to be more of an expression rather than a separate taxonomic group. Smaug — the last great dragon of Middle-earth, slain by Bard of Esgaroth.
Thus, Galadriel's dark form in Jackson's The Lord of the Rings personified what would have occurred had the Lady of Lothlorien given in to temptation and taken the One Ring for herself. She would have succumbed to evil because the Ring was indomitable, even with her power.
Gandalf's main reason for supporting Thorin's quest in The Hobbit was to eliminate the threat of the dragon Smaug, who would be a powerful ally for Sauron. Despite popular belief, the Balrog known as Durin's Bane was more powerful than Smaug in Middle-earth, being a literal, primordial demon.
The only recorded instances of Balrogs having been slain are Gandalf's slay of Durin's Bane, Echtelion's slay of Gothmog and Glorfindel's slay of an unnamed Balrog.
