What is more terrifying?

Demons are more dangerous, so I voted for them. But undead are scarier in appearance. However, appearances can be deceiving. Unlike the straightforward and unintelligent undead, demons can (and often do) take indirect routes, and often someone, thinking they are fighting against demons, actually helps them. They are too cunning, which is why they are more dangerous.
Loken, you made a slight mistake with the history of the discipline. The creatures created by Bezresen were cursed by envious angels, and they became demons. Before that, there were no demons.