After clearing dragon nest you reach Red Caves from where you can go to either the underground lake or cultist hideout. The Underground lake path is locked up ahead for now you need to clear the cultist hideout and defeat the cultist leader. After winning you will receive a key. Now head back to red caves and go to the underground lakes which leads to Dark Area which leads to Bright opening. It is recommended to mark this dark area with the mark spell. In the bright area you encounter an alien monster. If you accept his deal all slaves travelling with you will be rendered into lifeless vessels and leave your party and all your base stats will increase by the number of slaves you sacrificed. No limit has been seen yet to the magic stat boost, you can come and sacrifice slaves repeatedly. To use the magic stat boost it is recommended to take slaves with only enough magic to use barrier because some enemies might kill them. Or you can just buy guidance at the Mage's Order and just spam the spell to get through the tunnels without resistance.
If you fight the alien you get a fair amount of loot and you will be able to repeat the fight. If you kill the alien a new one comes out and you can negotiate and sacrifice your party with the new alien.