Waterhorse Dragons received their name due to their horse-like physique and endearing behavior. They are capable of surviving out of water, and when on land their skin secretes a gelatinous goo to retain moisture. However, their large paddle feet are better suited for swimming, and waterhorse dragons tend to move very awkwardly when on land. Waterhorses are very friendly dragons and enjoy playing with humans.

Dragons are highly-intelligent reptilian creatures that—from a human perspective, at least—appear to live forever. Many different varieties of dragon exist, each with their own unique qualities, habitats, and behavior. Adolescence in dragons is usually marked by the growth of a hatchling’s wings, although not all breeds of dragons grow wings and some breeds have other traits that indicate the beginning of maturation. In Galsreim, dragons and humans coexist peacefully.

Co-operation lives in the Charlie 4 network, in the smallest pond. Because he's energetic yet patient, and his goo is useful for mixing some paints, he's responsible for the marking and upkeep of the labels on caves and buildings. Every structure has its function painted on it in big, bright letters. There's a tower labeled "Jewels", a two-chamber cave labeled "Adult School", a house labeled "Royal Family", and so on. However, unlike Charlie 1, 3, 5, and 6, none of the labels in Charlie 4 are correct. The "Jewels" tower is actually the lookout post, and "Adult School" contains wood and metal supplies. Charlie 4 doesn't even have a monarch; the elected council holds session in the "Pub". Every few years, the labels switch around. Ostensibly, this is to confuse and slow down invaders, and Charlie 4 has seen a lot of those in the past. Everyone who's lived there for a while has all of the places and functions memorized, and Co-operation himself uses a few mnemonic devices to remember.