  Motivated by the recent experiment [H. Kadau \textit{et al.},
arXiv:1508.05007 (2015)], we study roton instability and droplet formation in a
Bose-Einstein condensate of $^{164}$Dy atoms with strong magnetic dipole-dipole
interaction. We numerically solve the cubic-quintic Gross-Pitaevskii equation
with dipole-dipole interaction, and show that the three-body interaction plays
a significant role in the formation of droplet patterns. We numerically
demonstrate the formation of droplet patterns and crystalline structures, decay
of droplets, and hysteresis behavior, which are in good agreement with the
experiment. Our numerical simulations provide the first prediction on the
values of the three-body interaction in a $^{164}$Dy Bose-Einstein condensate.
We also predict that the droplets remain stable during the time-of-flight
expansion. From our results, further experiments investigating the three-body
interaction in dipolar quantum gases are required.
