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The area known as the Ruins of Silvermoon makes up the western half of Silvermoon City, the capital city of the blood elves and the former kingdom of Quel'Thalas. It is split from the reconstructed eastern districts of Silvermoon City (now the capital of the Horde's blood elves) by the Dead Scar, the path taken by Arthas Menethil and the Undead Scourge on their way to the Sunwell to resurrect the dead necromancer Kel'Thuzad. As they marched across Quel'Thalas at the bidding of the dreadlord Tichondrius, Arthas and his warriors corrupted everything in their path. The Scourge smashed through the Elfgates defending Silvermoon from attackers and decimated the Thalassian Ranger Corps, led by Sylvanas Windrunner, before finally reaching the Sunwell Plateau and placing Kel'Thuzad's rotting corpse into the magical waters of the Sunwell. Kel'Thuzad was resurrected as a powerful lich, whilst the well was forever corrupted.
It is likely, due to the large amount of house buildings in this part of Silvermoon City, and the lack of house buildings in the populated Silvermoon, that this was — before the Scourge came — the residential district of Silvermoon City. This would also explain the huge amount of Wretched in this concentrated area and the amount of wandering elves in Silvermoon, such as Rarthein.
This area holds a small populated area, Falconwing Square, which serves as an intermediary point for new blood elf players between Sunstrider Isle and Silvermoon City, much like Brill, Dolanaar, Goldshire, Razor Hill, Kharanos, Bloodhoof Village, and Azure Watch. It has an inn, mailbox, profession and class trainers, and quests within the ruins of the west half of Silvermoon City. For example, a level 5 player can pick up the cooking profession and a recipe they will need to raise that profession for the next 15 levels here in the inn, in the Ruins of Silvermoon. However, there are not many quests here, and it is probably only good for a level or two before you move on to the quests immediately south of the Ruins of Silvermoon or to Fairbreeze Village.
Brian Morrisroe, one of Blizzards lead artists state in a behind the scenes video, said that the lack of energy from the Sunwell caused the then high elf buildings in the current ruins of Silvermoon to fall apart.