There was once a softer material in that hole, and it weathered out. It looks stream worn, so the water probably swirled in the hole making it that shape. The hole is "oblong" that gives it away, if a human had "dug" the hole out, it would be perfectly round. I would have picked that up too.
Your piece if used to hold a spindle would serve as a bearing. As smooth a bearing as possible with friction desired at opposite end of spindle.
Yours might work with more polishing.
Wood is lighter to carry. Borrowing or carrying a hot coal is easier!