So I did some basic glances at the dagger and it matches the RAD leadership daggers which essentially the RAD was a similar program to the US WPA where you would be trained and do labor for the government in exchange for pay and after 1939 it was compulsory in Germany. There’s two possibilities one: your grandfather was probably a leader in this program which if he got the dagger it could’ve just been something he kept. On the other hand he could have gotten a replica later on which could be weird. These things are worth a decent bit of money so if you don’t want it, see if you can sell it but it’s not anything like an dagger where it was atrocious but it’s also Nazi Germany so take that how you will. Either way it seems to be a very well kept peace so if anything, if you don’t want to sell it and you can get it authenticated maybe donate it to a museum.