Erebor is an underground city, home of the goblins, which can be accessed by the Erebor towers at the Imperial Sea.
It started in year before all the other types of populations (humans, dwarves, elfs, ect.) existed, all started in the currently forgotten civilization, Aurum, but then, year ET61 , city was discovered by some miners and it became Erebor.
At north, south, west and east of this city you can find the Imperial Sea, as said before, it is located in the middle of the sea, but it can be easily seen from around.
The city was created in year ET65 , so its practically a new city.
Idea of city was inspired in Little Lamplight, from Fallout 3.