The restaurant from the intro, or rather what remains of said restaurant after the demon smashed through it. You only get to see the aftermath of what it did, but the descriptions of the bodies of the unfortunate people who happened to be dining in the restaurant that evening, makes it clear that it was pretty damn gruesome.
The merpeople went to civil war, and they forcefully drafted human civilians as their cannon fodder. Those are modern-day tactics. Think about it; if an entire world centered around pacifistic harmony with nature can wage modernized war on each other, that means even the supernatural races are not so different from humanity, especially at its worst. And their wars can spread just as bad as ours.
The reveal of who the demon is: a human psychopath - specifically, the owner of the body you're wearing. The player character is actually a spirit of knowledge and they swapped bodies (well, a body) with a smooth-talking, Lack of Empathy, mass-murdering cult leader who has been masquerading as a demon-possessed human for a whole year. All the death and pain they inflicted was specifically to create a parallel world where they could be their psychopathic self in public. The sheer realization of how thoroughly they were able to integrate into society for decades before they ruined the player character's life, of how shallow and simple their motives can be while instigating chaos on a city-wide scale, and the fact that such incredible destructive evil could be so completely human in origin and thus untraceable by any magical means, is simply more terrifying than any of the horrors you've seen so far.
