The trickster god Loki had three children, Hel, a human like being, Jormungandr, a great sea serpent, and Fenrir, a fearsome wolf.
The gods feared what these three children could do to the realms and hatched a plan to deal with them and avoid ruin.
They banished Hel to Niflheim where she now presides over the underworld realm Helheim. The gods threw Jormungandr into the sea that surrounds Yggdrasil, the world tree. He grew so big in the sea that he was able to surround Midgard and grasp his own tail.
With Fenrir, they sought to bind him. However, Fenrir was a ferocious wolf that no bind could hold. So the gods looked to Nidavellir, the home of the dwarves. The dwarves were master crafters and would be up to the task of creating this bind.
They decided to bring together several items that could not be fully understood or grasped - the footsteps of a cat, the beard of a woman, the roots of a mountain, the sinews of a bear, the breath of a fish, and the spittle of a bird. By bringing these elements together, they created Gleipnir. It looked soft and supple and was very light.
Taking this to Fenrir, they challenged the wolf that he could not break out of this chain, playing to his ego. Fenrir was more than happy to prove the gods wrong after looking at this flimsy chain.
But, he also sensed a trap. So, he refused the challenge, unless one of the gods was willing to place their hand in his mouth. If he could not break free, he would bite the hand off. The gods, knowing he wouldn't break free, said no. There was no one willing to come forward at first.
However, Tyr, the god of war and justice, stepped forward and accepted the terms knowing full well what was about to happen. He placed his hand in the mouth of the great beast and Fenrir was bound.
Upon trying to break free of Gleipnir, Fenrir realised he had been tricked and so bit the hand of the god of war and justice.
Only Tyr showed the bravery and courage needed to save the realms. He then became the one handed god.