I've had it identified as Jeweller's Rouge. It seems that it's fine particles of iron oxide in wax. Apparently it doesn't "cut" so it make it perfect for folks and their thin bladed straight razors. It's fascinating I'd love to get a variety of blades under a microscope!
This paper by John Verhoeven, a materials scientist has everything you need to know about blades including lots of microscope pictures:
http://www.mrsoso.nl/bushcraft/knifeshexps.pdf
Robson is quite correct in that all of the abrasive compounds will scratch or abrade steel and that can be clearly seen with a lens of even 10X. With a microscope and taking magnifications much higher, the scratches become far more evident. The main difference in the compounds are how jagged the particles are, since more jagged ones will do more scratching.
I've had a preference for 0.5 micron green buffing compound for many years. It's incredibly effective and crayoning a very light layer onto paper or cardboard leaves you with little doubt of its effectiveness since a few strops of a knife will turn the green to black as removed metal is left on the paper/cardboard. Nevertheless a person isn't going to wear away a blade due to the extreme fineness of the abrasive. I once used a single razor blade for over six months, stropping between uses and re-honing every 20 uses. And like Lee and Verhoeven I can take a razor blade and make it much sharper than anything made in the last few decades - and keep it that sharp for six months of heavy duty. I'm certain that it would have worked for many years, but I had other stuff to experiment on. So forget the wear concern. The only factory blades which were as sharp as the one I repeatedly sharpened were Durham Duplex blades from the start of the last century. The big problem is testing, since once a blade will slice free hanging toilet paper, there is no way of testing for further improvement without building a laser testing rig.
With knives and other carving tools for wood, the finer the polish you put on the edge, the less saw like it looks under a microscope, and so the longer the edge lasts. I rarely sharpen my Moras, just strop them for a few minutes after a day's use, so they will last longer before being worn away than conventionally sharpened blades. This applies to slicing cleavers and even axes, too, in my experience. In contrast knives for meat cutting and butchery work best coarsely honed since the larger "teeth" left on the edge work better on meat. So those suffer sharpening wear faster due to the coarse abrasives being used more frequently as the larger "teeth" break off.