"Upgrading is risky without additional special items like a Blacksmith's Blessed Hammer, which can prevent items from breaking during upgrades. Without the hammer, we will be taking a risk. So, surely you have something that I can upgrade for you today?"
With each upgrade, the cost gets higher.
Upgrading has a chance to fail and upon failure, the item won't break but any material or gold used will be destroyed.
The Blacksmith is located in the spawn of Guardstone.