The Driftwood arena can be found under the village’s tavern. At the arena, speak to the current champion Murga and she tells that she accepts your challenge only if you beat five lower level fighters blindfolded. This is quite hard since all your attacks have a range of couple meters.
What I did was fight normally without the blindfold and beat the contenders. Afterwards Murga complained that I wasn’t worthy. I went back and killed her. Then I talked to Arran at the arena and suggested I would fight the voidwoken for the champion’s title. After the fight, you get the achievement and a key from Arran to continue your quest for becoming ‘the One’.