I agree, I think the protocol needs to have sustainable revenues and treasury to support long term growth, perhaps initiate token burns, etc. I believe charging issuers a percentage of AUM would be fair, I think a technology intermediary could charge 50bps or so. I dont believe most issuers are set up like funds (at least we are not), so we make our revenue on the originations and spread.
Could LPs also pay a small fee taken off their top of their gains?
Agreed. Fees should somehow be tied to AUM as opposed to transactions… reason being, shorter dated tenors will always have granularity in the portfolio and higher transaction volume. I acknowledge that we are biased in this regard given asset tenors and liquidity in trade finance.
We 100% support the implementation of protocol fees.
If the circulation of CFG continues to increase then it will continue to be debased.
Asset Originators (of which we are one) should be paying CFG fees now for minting NFTs
Those fees should have a minimum and then be related to consideration / monetary value of drawn down funds on each NFT as this will volume weight the costs fairly vs the utility derived
The fees should not be sent to the on-chain treasury but instead be sent to a warehouse which is then burnt on a regular basis.
Fees in aggregate should be larger than issuance, constricting the supply of CFG
Only the issuer need pay fees, as funders will be paying indirectly as the spread between issuer income and issuer rewards to funders will widen to cover the cost of transactions.
$80M TVL is tiny in the world of finance. Many of the A/O’s can deploy multiples of that amount of capital on their own (eg Amazon seller financing for just the top 20% of sellers is many billions of dollars) so fees will be able to drop over time.
Good evening prankstr25!
Thank you for you full and detailed answer.
Hm… If the fees should be paid in CFG this is mean that you can not predict the value of the token in near future for 6-9 months and as a result, you can not plan your future developing, hiring, partnerships and etc.
I’m not sure if still possible to pay the fees in the on-chain treasury in Polkadot in DAI,USDC, USDT (maybe Devs could provide some information).
Anyway, thank you again for your input.
Good evening Harbor !
Thank you for your feedback!
First of all, thank you for your feedback and for providing answers for all questions!
So would be better to pay fees in DAI, USDC, USDT or?
The goal of the fees should be to produce value while maintaining Centrifuge as a competitive option against TradFi alternatives. For this reason, I’d lean towards protocol fees being charged in a stable as the user experience will be simpler. This would shift the burden of acquiring CFG from the issuers to the DAO, which should be trivial for the DAO and could be challenging overhead for the issuer.
With the fees, the DAO can then choose to purchase (buy-back) CFG, or to fund operations, without the concern of having to sell CFG - selling governance tokens is something I’ve found to be extremely challenging for most DAOs.
As far as I understand, from an economic standpoint, the “cost of servicing” would be a fixed cost. Regardless of the size of the pool, the costs are fairly similar. However, strictly using a fixed cost could reduce the upside for the DAO. I’d opt for a max(x,y) solution whereby x is the cost of servicing a pool with an additional margin, and y is some function with a variable rate based on the size of the pool or the credit utilized.
Softly held opinions here, but I believe the issuer would be in the best position to shoulder this cost.
No downside in setting this up and setting it at 0% to start.
Some background - I am part of the L1 Digital investment team and led our recent investment in the protocol. We’re excited to be joining the community and hope that our input here is helpful and constructive.
I would agree that it makes the most sense to charge this fee in a stable coin, most likely Dai since that is the stable coin used currently by the protocol. It sounds like that may cause some complexity with the treasury however in my opinion having a relatively predictable income in Dai and having a strong Dai reserve will put the protocol in a better position of longevity.
As I am still new to the ecosystem I’m not sure I have much insight here, apologies.
I would vote to only charge the Issuers and not charge the investor. In my experience from raising capital investors really don’t like fees charged to them in order to invest. For our current TradFi Debt Fund we don’t charge any fees to our investors. While most funds do charge a 1% management fee they still pay a preferred return based on 100% of their investment so as long as the fund hits it’s returns it is almost as if a fee was never charged.
With this being said the only reason for Issuers to join the protocol is going to be one of two reasons 1. Access to more capital or 2. Lowering the cost of capital. For us (we are wanting to be an issuer) we have plenty of access to capital in TradFi, so we are interested in Centrifuge in order to lower our cost of capital. I think the protocol fees should be charged only to the issuer but the fees should be low enough so that the protocol can still provide a lower cost of capital than TradFi.
I would say a fixed % of funds borrowed from the pool. So maybe .25% - .50% of funds borrowed from the pool. Also, me as an issuer, I would rather pay these fees when the loan is paid back to the pool rather than when the funds are borrowed from the pool. I’m not sure if that’s an option or not.
Good day @BlockTower and welcome to the Centrifuge Forum!
I`m very excited about your POP process!
We will be very grateful if you could provide your expert feedback about Centrifuge Protocol Fees and the questions asked in the first message.