User blog comment:AYET/AYET talks about chapter 725/@comment-5962458-20131017175105

People's bodies are turned into toys and their essence is used to combine with the SAD and produce an artificial devil fruit. That also explains the "why turn them into toys" question. The people that get turned are the losers of the colloseum fights and the people opposing DD's dominion.

That reminds me of fullmetal alchemist and how filosopher's stones were created. I believe that they use the coloseum fighters who lose in order to steal their essence, combine it with the SAD and create the smilies. There, called it.

Close enough! Time to brag I guess >.>

I agree with all the notes you made above AY. Couldn't have expressed my opinion better myself!