Alberic: Ishgard's priceless relic is none other than the eye taken from Nidhogg that day. It is a veritable wellspring of dragon power─even so removed from its owner, it can exert control over the hearts of men.
Alberic: Haldrath himself felt its malign influence, but his love of justice brooked no corruption, and he prevailed over the power, claiming it for his own. And so it was that the first Azure Dragoon was born. ~Lance of the Fury~
The Dragonseye is the source of all Azures to date that we know of in 1.0, there is only ever 1 Azure at a time as far as we are made aware, until you as the player become an Azure. It chooses who are worthy to become the Azures. Why?
Estinien: I suppose I must give thanks, for it was the Eye that revealed to me the truth -- a truth so damning as to undo a lifetime of trust. I loved you as a father... but I can ill forgive you for Ferndale.~Into the dragon's maw~
There was only one other we know of that was at Ferndale and capable of telling Estinien the truth, Nidhogg. The eye again is his and so perhaps he understood that Alberic abandoned the dragon within before the last moments of the fight. If he is able to commune through the eye then perhaps all the choosing was his design from the beginning?
Whatever the reason it would appear that the Dragonseye was lost when Estinien dissappeared. Which means no new Azures can be made unless it is found or another method for their creation is discovered. It may not be possible to find it as Nidhogg may have reclaimed it.
