Most people think of Loki as a trickster-god: untrustworthy, malicious.
This reputation comes from only a few incidents in the Eddas and myths, and while some of those stories carry significant impact on the world, case by case we see he was sinned against more often than he sinned. Let's take a look.
Renowned etymologist and Scandinavian scholar Anatoly Liberman suggests that in order to understand the gods, we must approach them through etymology—word origins. The roles of many gods, giants, and objects are made clear by understanding how they were named. Loki's etymology isn't exactly clear, of course. Why would it be? Likely his name comes from lok, knot, lock, or loop. It's only coincidentally connected to logi, fire, which would tie neatly into his father's name. Liberman believes Loki could come from loch, an Old German word for a hole or grave, which echoes his sometimes-role as god of death.
Loki's Family and Heritage
He was born to a goddess, Laufey, also known as Nál. We don't know much about her and we're not sure what her names mean: some theorize "bundle of leaves" and "needle," respectively, perhaps because she was of smaller, frail build. Nonetheless, she is an ásynja listed among the þulur of the Æsir, and that's what entitles Loki to reside among the gods.
Perhaps it's because of her exceptional status as a goddess that causes him to break with Norse tradition and take his mother's name, Loki Laufeyjarson, instead of his father's. This is one of many notable anomalies in his story.
His father was a fearsome jötunn named Fárbauti, which is believed to mean "cruel" or "dangerous striker," like the terror of a lightning strike. You can easily picture lightning blasting a tree and setting it on fire, the father giving birth to this son. Just as Loki inherited a place among the gods from his mother, so did he inherit his role in the natural order (or chaos, as humans call it) from his father.
This is important, because it's not the last time Loki's story breaks the rules of Norse mythology. Throughout the rest of the legendary myths, male jötunn are forbidden from mating with goddesses. The Æsir are at the top of the heap: they have have sex with anyone they like. The Vanir gods can't select ásynjar, but the Æsir can sleep with Vanir goddesses. And all the gods can fuck giantesses, because sex with a giantess usually results in a god or a hero, but male giants are forbidden from mating with goddesses because that would give them divine lineage, the natural law forging an inroad to divine law.
And yet! Loki's father successfully coupled with a a goddess. Loki is the exception to so many rules.
Loki had two brothers, Býleistr ("storm-flasher") and Helblindi (something to do with darkness, or Hel-blind). Neither of these two are actors in the stories, they only come up in kenning, like when Loki is referred to as "Býleistr's brother."
Why Is Loki So Despised?
Perhaps the two events that burden Loki with the reputation of the bad guy are his bringing about the death of Baldr and steering Kjöll, the ship bearing giants and monsters to the battle of Ragnarök. These also have to be examined individually.
It's true that, with the giantess Angrboða ("she who offers sorrow"), they are the parents of three fearsome monsters: Fenrir, who will devour Óðinn at Ragnarök; Jörmungandr, the Midgarðr Serpent who releases his hold over the worlds to fight Þorr; and Hel, who is cast down to preside over the icy, dark halls of Helheimr, receiving those who died in ignobility of illness or old age.
The death of Baldr is a strange story among the Old Norse myths for two reasons. The motif of a god having bad dreams doesn't appear anywhere else in the myths. As well, the gods' concern is strange: they realize that if Baldr can die, so can any of them, and yet they take no precautions against such an event. We already know they can die, as they started to when Iðunn and her golden apples were secreted out of Ásgarðr—yes, by Loki, but that wasn't his fault.
When Baldr dies, everything in the world goes wrong. His funeral boat gets stuck in the dock, and it can only be loosened by Hyrrokkin, a giantess covered in scars from being burned (reminiscent of Gullveig). She kicks it so hard, the friction sets it on fire, and her feat pisses Þorr off so badly, he tosses a couple dwarfs into the burning boat.
But not only are Baldr's nightmares unusual in the style of Old Norse mythology. Loki helms Kjöll for the final battle, but this must be a story from a different group of myths, because Loki now takes on the role of a god of death. Snorri Sturluson's and Saxo Grammaticus's records differed by a couple decades, but they contain vastly different stories. Loki isn't implicated in the death of Baldr, in Saxo's version, for one thing. Snorri did not presume to judge which stories were accurate: he simply grabbed them all for the sake of posterity.
Loki and the Afterworld
However, if Loki serves as a god of death here, this solidifies his blood-bound brotherhood with Óðinn, himself the "furious god of death." They form a partnership in the Wild Hunt: Óðinn is the leader, chasing people to their graves, and Loki stewards the procession, a team of corpses on horseback, forced to participate in the hunt.
Óðinn and Loki are recorded as being aware of each other from "the underground kingdoms," though they only knew of each other's behavior and presence there. In many myths, Death is chained in the afterworld, and should he be released, no one would survive. Loki, in Saxo's Utgarðr, is chained in the darkness, surrounded by serpents and belching lethal gas.
What is Utgarðr? We know the myth of Þorr encountering a giant so huge, his party can camp in the giant's glove. Utgarðr means "out of the enclosure," existing outside of the nine realms of the universe in Old Norse cosmology. It's literally Nowhere, and everything that happens there is an illusion and a parody of the world Loki and Þorr know. And the star of the show, Utgarðr-Loki, he's not merely a parallel-Loki from an alternate dimension: he is the god of death in a primitive styling of the afterworld.
Aside from Baldr, Loki is the only god described as handsome. In fact, he may be interpreted to be a talented sexual partner. He seduced Sif, Þorr's wife: when a woman in Scandinavian society was no longer a maiden, she cut her hair. This is the significance behind Loki shaving Sif's head, which he made up for with golden hair from the dwarfs.
And then there's Skaði. In the Lokasenna, Loki refers to having had sex with this giantess. But when would that have happened?
Loki the Lover
Let's go back to when Loki, Óðinn, and Hœnir were out traveling and found difficulty cooking meat they'd slain. A giant eagle claimed he was controlling the temperature of the fire and could raise it if he got some meat. This eagle was the jötunn Þjazi, father of Skaði, the giantess of winter hunting and skiing.
Þjazi took more than he deserved, and Loki attempted to beat him up with a staff. But the staff stuck to the eagle's body, trapping Loki's hands with it, and Þjazi flew low over the ground, beating Loki up with trees and boulders until he agreed to kidnap Iðunn and the golden apples that gave the gods their immortality. Loki was forced to go along with this, but when the Æsir started to age, they threatened him to correct the misfortune. Loki did, borrowing Freyja's falcon cloak to fly back to Jötunheimr, grab Iðunn and the apples, and zip back to Ásgarðr. Þjazi soared after him in eagle-form, but the gods had prepared a fire-wall to ignite once Loki returned safely. Þjazi was caught in the inferno and writhed in agony as the gods came out to finish him off.
Due to this, Skaði armed up and stormed Ásgarðr, ready for fucking war. She was completely in the right, and one thing we know about giantesses is that the gods are powerless against them. But they placated her by granting her a husband she chose by his feet (see also: Cinderella myth), placing Þjazi's eyes in the sky as stars, and then Loki himself stepped up to perform some comedy. He tied his balls to the beard of a goat, and they both ran around screaming until he collapsed into Skaði's lap, and she laughed like she hadn't since her father died.
Why her lap? Understand that laughter was a sexual sign in these stories (see also: fairy tales in which a princess will marry the only knight who can make her laugh). Now we have the precedent for the Lokasenna, when Loki claims to have had sexual relations with Skaði. But he goes a little too far and talks about how nothing can change the fact he was the last god to abuse Þjazi in his death-throes. This causes Skaði to promise that all of her halls and temples would curse him, and this carried actual weight: Sweden is full of place-names in her honor, and in fact some theorize "Scandinavia" itself derives from her name. She does have the halls and temples, she does have the gravitas, and as we see later, she's the one who affixes the serpent above Loki's prison, tormenting him with venom.
Despite being handsome, clever, and a successful lover, Loki is never cast as a god of life or fertility. He's closer to a god of death than a trickster-god.
Apologia for a Trickster
Yet most of the time, Loki's crime was being the smartest one in the room. Picture a room full of angry, crude, half-drunk Vikings, and then you've got a slight and pretty man who has to think on his feet. In fact, among these hypermasculinized men, Óðinn accused Loki of ergi, a derogatory term that doesn't just mean homosexual, but the passive, receiving role in sexual congress. To be fair, Loki accused Óðinn of femininity for having learned seiðr from the Sámi of the north. Seiðr was considered women's domain, and the Sámi were looked down on and feared as outsiders.
When Þjazi had Iðunn and the golden apples, Loki committed a daring rescue in hostile territory—he'd abandoned Jötunheimr for Ásgarðr—to make things right.
The gods commissioned a giant-in-disguise to build a wall around Ásgarðr in an impossible amount of time, and his payment would be Freyja's hand in marriage. They asked Loki his opinion, and based on the information at hand, he thought it sounded like it would work out for them. When they realized it was a deception, Loki freakin' turned himself into a mare and seduced the giant's horse away, culminating in the birth of the eight-legged steed Sleipnir. That's nothing to sneeze at.
And when Þorr's hammer was stolen by the powerful jötunn Þrymr, the gods demanded that Loki find it, which he did. And as in the previous story, it's Freyja's dignity at stake, as another giant attempted to lay claim to her. The plan to dress Þorr up as Freyja was clever enough, but Loki did not abandon him in this humiliating moment: he dressed up as a bridesmaid and accompanied him. That's loyalty.
When the gods are hunting Loki down for the murder of Baldr—of which Höðr is completely absolved—he turns into a salmon to hide. To bolster their ranks, the gods bring Kvasir (a man so wise the dwarfs killed him to make the Mead of Wisdom out of his body) back from the dead to search for Loki. Living in isolation, Loki invented the net, yet another turn that completely does not resemble any other part of the myths.
You can know a god by the meaning of their name, but you can also know them by the objects associated with them. Óðinn is known by the noose and the spear, and Þorr is famous for his hammer, Mjolnir. Famous though he is, Loki has no such characteristic object. He's a shapeshifter. He's had a few sexual exploits, which is unusual for a god of death—the exception being Óðinn, who slept around a lot, using giantesses for personal gain.
Liberman indicates that calling Loki a trickster is too reductive: he does not behave as tricksters typically do in other folklore. Instead, think of him as a "literary instrument," whose presence and involvement serve to underscore the characteristics of the other gods.
And clip your nails, to keep Kjöll as small as possible.