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Zao is a continent where Vengoth, Farmine, Orc Land and Lizards are located, east of Yalahar and north of Edron, does anyone know of its history and the relationship between Lizards and Dragons that live there?
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You have two different questions. "When was the city of Zao created?" and "What is the relationship between the lizards and dragons in Zao?  Edited your question as one of your questions was already asked here: https://www.tibiaqa.com/8568/what-are-the-names-and-creation-dates-of-all-the-major-tibian-towns

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Dragons are known to be leaders of Lizards & Drakens. It is also worth to mention that  Drakens are breed from both- Lizards and Dragons.

"This summer you will learn about the true rulers of Zao.

It is the summer of the dragon, and it is really getting hot out there.

 

Prepare yourself for the ultimate challenge!"

Source : Tibia.com The True Rulers of Zao Teaser for Summer Update 2010- 25th May 2010

 "Lizards were chasing me. Lizards, I've never seen before... well trained armies of lizard legionnaires, elite troops consisting of lizard high guards, lizard dragon priests capable of powerful magic and with an obsession for conflagration and ritual arson. There were also lizards with an overly aggressive, even self-endangering fighting style. Lizard zaoguns, this name still echoes down the dark hallways of my mind... And I saw lizards with a dark skin as if the black oily substance flows right through their veins, as if the dark presence has chosen them as a temple. Their souls must have been driven to madness...

imageBut I saw even more terrifying creatures.... The lizard armies were led by dragons... mighty dragons. Draken warmasters full of rage and sheer power, draken spellweavers casting spells that could shatter whole armies.
Suddenly, a few ghastly dragons appeared in my nightmare. Their bodies looked as if they had failed miserably in an attempt to transform themselves... abominations, shrieking in their eternal agony. I tried to run away but I could not move my legs, I screamed... and finally woke up in cold sweat.

And now, several hours later I still feel like all my energy has been drained from my body. Something is poisoning my mind. Maybe I've already spent too much time near those black puddles. I'm afraid my curiosity might kill me this time but the knowledge I gained, the experiences I made, won't be lost. That's the reason I'm writing these letters... even if I should perish, my spirit will survive.

Yours faithfully,
Amaro 

Source:Tibia.com- Terryfying Creatures Teaser for Update 8.54 27th November 2009

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Zao was added to the game at December 9,2009. Version 8.54 of Tibia.

According to TibiaFandom we have:

Zao is a recently human-discovered continent north of Edron and south-east of Yalahar. It is a multispecies continent, however, the continent is massive, so these cultures rarely appear together except during their many conflicts.

The continent is split into six main areas: the Farmine mountain range, the Zao Steppe, the Dragonblaze Peaks, the Muggy PlainsNorthern Zao (beyond the Great Gate), and the great city of Razachai. For humans, the most attractive location is the hopeful dwarven city of Farmine, which is in continual development but they have difficulty convincing others of Farmine's potential, and thus cannot acquire external assistance and funding. On the top of the mountains there lives a primitive human tribe. The tribe are by nature shy and not hostile, but are threatened by the Orcs trying to claim the land. The orcs are unyielding brutes that will kill anything that may step in their way of dominating the land. Their leader, Curos, occasionally organizes Zzaion raids to weaken the lizard threat in the south-east of the plains. By far however, the biggest threat of all the land are the lizards and draken, who together have founded the great city Razachai, and by sheer numbers they can take down even the strongest foes. On top of all this, the autocratic emperor's poor oversight meant for a plague to be spread out to much of Zao. The plague has reached epidemic level now and spreads through the water springs; drinking the water has lead to many sicknesses and some deaths. Atop the appropriately-named Dragonblaze Peaks live dragons. Although dragons are expected to have lived at Zao for nearly as long as the lizards, they tend not to inhabit low-lying areas and have claimed the mountain ranges between the Muggy Plains and the Zao Steppes. The only exception being the underground in which Lizards and Draken still inhabit, and have established the Zao Palace deep underground. The dragons are mostly neutral, but have been known to assist the Lizards in battle and were responsible for the restabilization of the Razachai empire.

There is also rumored to be a subcontinent on the west of the Zao mountains shrouded with evil. According to rumors, a vampire family inhabits the land and are the vampire threat of Yalahar.

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