Maybe the dragon sword has the ability to absorb chakra. When Naruto is in a fight, he could use this to his advantage by draining his opponents' chakra through the sword when it makes contact. This would weaken his enemies and at the same time, the absorbed chakra could be used to power up the sword's other abilities.
There's a fanfiction titled 'Naruto and the Blade of Destiny'. In it, Naruto is given a special sword by a mysterious figure. This sword has the ability to enhance his chakra and gives him new jutsu - like abilities. The story then follows Naruto as he masters the use of this sword while also facing off against his usual foes in the Naruto universe.
The sword could have the ability to cut through any chakra - based attacks. Since Naruto's world is full of ninjas using chakra, this would be a very useful ability. It would allow Naruto to easily defend against and counter his opponents' attacks.
The sword might also have a connection to the spirit world. It could allow Naruto to communicate with the spirits of the Uzumaki clan or gain insights from their past. This would give him an edge in battles as he could learn from the experiences of his ancestors.
One possible ability could be enhanced cutting power. It can slice through the toughest of materials, like it's cutting through butter. For example, it could easily cut through solid rock or even chakra - enhanced defenses.
Well, in some fanfictions, Naruto might obtain the overpowered sword through a mysterious inheritance. Maybe it was left by a powerful ninja from the past and Naruto discovers it in a hidden cave or something.
Well, in some fanfictions, Naruto might obtain the Master Sword through a strange portal that connects his world to the world where the Master Sword exists. Maybe he's on a mission and stumbles upon it by accident.
In some fanfictions, Naruto might obtain the dragon sword through a special quest. Maybe he stumbles upon an ancient temple during one of his missions where the sword is hidden as a powerful artifact, guarded by some kind of magic or traps. He overcomes these obstacles using his ninja skills and determination, and thus gets the dragon sword.
Well, in some fanfictions, Naruto might obtain the Sword of Tengu through a quest. Maybe he has to help a spirit or an ancient being in return for the sword.