Potassium Cyanide is created when one uses the Chemical Synthesizer to combine Potassium, Carbon and Nitrogen. To create this, one will put One vial of potassium, one vial of carbon and one vial of nitrogen into the Synthesizer. (In said order)
The easiest way to obtain Carbon is by mining coal or diamonds. You can obtain potassium by breaking down gunpowder or purple dye, and Nitrogen by breaking down red mushrooms.
It is unknown how much damage Potassium Cyanide does to a player, but it is assumed to insta-kill them.