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The Mysterious Blade is the only weapon that can be equip by all characters in Kingdom Hearts: Shattered. Depending on which character equips it it changes form. In story mode it becomes a Joke weapon, however in Multi Player it allows Orion, Mira, Lind, Demitri, and Demitri-Orion to equip their ultimate weapons: Orion, Mira and Demitri-Orion equip Ultima, Lind equips Dragon Hunter, and Demitri equips Broken Heart.
When not equipped the Mysterious Blade looks like a plain sword. However when equipped, it changes its appearance based on whether your playing Story Mode or Mission Mode, and the character you're controlling.
Mysterious comes from the fact that it changes forms depending on the wielder, while blade comes from its base form as a sword.