These are used as part of the new loyalty system, the full information can be found: http://forums.playredfox.com/index.php?threads/loyalty-system.47/ Basically, you trade any [new] weapon into any blacksmith around the world and you get 2 donation points in exchange. The more points the higher your chances are of successfully crafting one of the items available from that NPC. Each NPC is unique so having 200 points from a blacksmith in Nanchang won't be the same in Icy. Save the steps for higher maps like Icy+ and NPC the rest of the steps. You begin with a weapon and use the step 1, if you are lucky you will get the bonus from that step and then you progress up each step. Step 1 is 2k up to around 6k at Step 5. Early levels this is good to make a little bit of gold to help with contribution points and just general early game gold. You can press L and look at the "Loyalty" tab for all the items you can donate to each NPC and what you can craft.
Here a guide for how to use stone: http://forums.playredfox.com/index.php?threads/add-stats-to-weapons-weapon-trad.120/#post-2013
