Following his role in bringing about the death of Baldur, as well as preventing his resurrection, it seems as though Loki may have, essentially, managed to get away with murder. At least, that is how the sequence of events seems to play out if you refer to The Poetic Edda. While the version of the story told by Snorri Sturluson, in The Prose Edda, indicates that Loki's punishment came almost immediately after Baldur's death, as the notorious trickster found himself pursued by angry Gods, the poem Lokasenna suggests that there was one more significant event that took place between Baldur's death and Loki's punishment.
Some time after Baldur's death, a great feast was held by Aegir, an ocean giant and friend of the Gods. All among the Aesir and the Vanir were invited to attend what was certain to be a lavish feast—with two notable exceptions. Having set off on a long journey, Thor was believed to be unable to attend—while Loki, who had likely been largely absent since the death of Baldur, had not been invited.
However, this was not enough to deter the notorious trickster. Upon hearing of the planned feast, Loki was determined to make his presence felt—practically forcing his way into Aegir's hall. Quite understandably, none among the gathered Gods were all that happy to see Loki arrive—and, the trickster found himself greeted by an uncomfortable silence. Most among the gathered Gods wanted Loki to be sent away, while some among them may have even wished for him to be immediately put to death. Loki was not about to let that put him off, though. Appealing to Odin, Loki reminded the one-eyed ruler of the Aesir of the vows that they had made to each other long ago, when they had declared themselves to be blood-brothers. In response, Odin was forced to relent—allowing Loki to claim a seat at the table. Of course, Loki had not come to the feast with any intention of trying to make amends for his past actions, or behaviour. In characteristic fashion, Loki had come for the sole purpose of antagonising the gathered Gods.
Ignoring any attempt to dissuade him, and knowing that the sanctity of the feast-hall prevented any violent response, Loki began to cast insults and accusations in every direction—tossing the Gods' various sins and failings back into their own faces. Loki questions the skill and bravery among the Aesir and the Vanir, while also accusing various goddesses of being both unfaithful and promiscuous—in particular, accusing Frigg of sharing a bed with Odin's brothers, Vili and Ve, and Freyja of sleeping with her own brother, Frey. Loki even goes as far as to claim to have previously shared the bed of some among the gathered goddesses, himself—claiming to have fathered a child with Tyr's wife, after mocking the loss of his hand to the great wolf Fenrir, while also claiming to have slept with both Skadi and Sif, Thor's wife. While attempting to goad Frigg, Loki also mocked her with the knowledge that he was the one solely responsible for the death of her son, Baldur.
Loki's mockery of the Gods only came to an end when Thor finally arrived. Knowing that Thor, unlike the other Gods, would be both willing and able to break the sanctity of the feast-hall and lash out violently, Loki took his leave soon after the God of Thunder's arrival—though, not before also accusing Thor of acting cowardly on his most recent journey. Of course, after this display, the Gods were no longer willing to allow Loki to remain free. So, while he was able to make his escape during the feast, it was determined that Loki should finally be captured and suitably punished.
While in hiding, Loki constructed for himself a small hut on top of a hill. This hut had only a single room and four doors, one in each wall, so that he could keep watch in any direction, and flee at the first sign of his pursuers. During the day, Loki took on the form of a salmon, and his himself in a nearby stream. At night, he sat by a fire, imagining the strategies that the Gods might use to catch him, while passing the time constructing fishing nets out of flax and yarn. One night, though, Loki noticed movement in the distance and, realising that his pursuers had found him, he immediately fled—casting his half-finished net into the fire taking on the form of a salmon once more, as he dove into the stream.
The first to enter Loki's hut was Kvasir, believed to be the wisest among the Gods, who saw the remains of Loki's net and immediately determined it to be a clue to Loki's hiding place. Sharing his reasoning with the other Gods, Kvasir had a larger net constructed—which the Gods then took to the nearby stream. As the Gods worked to drag the net up and down the stream Loki was, at first, able to avoid detection by hiding himself at the bottom of the stream, among some rocks. The Gods knew that he was there, though, and so they were not willing to give up. They cast the net into the water again and again until, inevitably, Loki was caught and dragged to the shore—where he was forced to return to his true form.
Loki's punishment was immediate. Dragging Loki to a cave, the Gods set up three large and flat stones, boring a hole through each. They then caught Loki's sons, Narfi and Vali, and brought them to the cave—where potent magic was used to transform Vali into a wolf. Setting Vali loose, the Gods forced Loki to watch as one son tore the other apart. Next, Narfi's intestines were used to bind Loki to the stones—and, magic was once again used to make his bindings as strong as iron. Skadi then took a large and venomous snake, and placed it above the bound trickster, where its venom began to drip into his eyes—leaving him writhing in agony. Satisfied, the Gods then took their leave—all accept for Sigyn, Loki's wife, who chose to stay by his side. Using a bowl, Sigyn attempted to catch as much of the venom as she could, in order to spare her husband. Whenever the bowl filled, though, Sigyn was forced to turn away for a moment to empty it—leaving Loki to thrash and writhe in agony once more. The violence of Loki's thrashing, it was believed, was the reason for earthquakes.
Loki was destined to remain bound in this way until the time of Ragnarök, when the magic of his bindings would fade and he would finally be set free to exact his own revenge.
© 2020 Dallas Matier