The Dwarven lifestyle includes mountaintops and deep caves; neither have ideal oxygen levels. Dwarves function in these environments because their beards contain a vascularized tissue that works much the same way as a salamander’s gill: allowing for exchange of CO2 with surrounding air. When dwarves enter areas of low oxygen or high CO2 the vessels that run through the hairy beards fill with blood. Beard breathing makes a difference when the air gets thin or sour, but a plump beard may also broadcast stress or excitement. The blood bladder, another unique organ, allows dwarves to deal with changes in blood volume.
The Dwarven Beard Explained
A 100 word Sci-fi explanation as to why Dwarves can never shave and why the beard truly is a matter of life and death.