Centrifuge Protocol Fees

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. :pray:

Good evening Harbor !
Thank you for your feedback!

Hello Stu!
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?

Any indicative value could you provide, please?

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Good day @Will_Coleman
We would like to hear your opinion about Centrifuge Protocol Fees!
Please provide your feedback, thoughts, or concerns that you might have :hugs:
Thank you in advance.

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.

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Good day lakejynch
Welcome to our forum!

Thank you for your elaborate feedback! :hugs:

I appreciate the welcome.

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.

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We are happy to see investors who are directly involved in governance and who could provide important and relevant feedback.

At this moment we also collecting feedback about Founding Documents:

Hello @ImdioR,

Thanks for the mention! Let me do some research and thinking and I will follow up with my thoughts on the protocol fees :+1:

Are there any other resources outside of this thread you would recommend I look through to make sure I am fully understanding the fee discussion up to this point?

I will aim to give you my in depth thoughts by Monday or Tuesday next week!

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Good day Will_Coleman and thank you for your comment and for your time.

You can find some more info here:

and something more here:

This is the reason why we, GCG, decided to reopen a post with 1 topic to discuss, otherwise, commenting on two different proposals could dissipate focus and attention.

Thank you! I will review these over the weekend and send my thoughts next week.

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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.

Yes I think this is a great idea.

Yes I also think this is a great idea.

I hope this is a helpful contribution! @ImdioR

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Good day, Will_Coleman!
You can not even imagine how your feedback is important and helpful!
Thank you.

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  • What currency of the fee we should implement in your opinion? - CFG
  • Structure of the initial fee implementation? Any ideas, or suggestions? - up-front fee covered 100% by the issuer
  • Who is the fee charged to (Issuer, Investor or both)? - 100% covered by the issuer
  • What is the fee based on? Is it a fixed fee or variable? - variable, a % of the transaction
  • Fees are paid into the on-chain treasury? - it makes sense for the fees to be paid to the on-chain treasury and be burned
  • Should we have an insurance pool or some supply set aside to cover pool losses? - an insurance pool based on the risk would made sense. It should be paid by the issuer
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Good day scytale and welcome to the forum!
Thank you for providing your feedback.

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Good day @BlockTower and welcome to the Centrifuge Forum! :hugs:
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.

Paying the service fees in stable coins makes sense since the assets issued, interest received and paid are denominated in fiat. Taking some portion, if not all, of said types of revenues and using them to buy and burn CFG would be ideal. Then, we would have a very clear protocol revenue, an immutable record of how much of it will be used to buy-and-burn tokens from circulation. This will help ensure the alignment of incentives where users have a clear sense of being stakeholders in the DAO.

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Good day SYZ
Thank you for your feedback! Very interesting point about splitting the protocol fee in native token and stable!

I like ImdioR replies except that CFG and DAI could be used for fees to facilitate dev input with a stable return to dev. It’s a good idea to have some percentage of the fees go to token holders paid in CFG.

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I like the idea of giving cfg more utility! I don’t think it should be a reward token unless you want tremendous sell pressure. Consider, a loan that has been taken out and based on the value the user has accumulated a large amount of CFG tokens. The user runs into some financial problems and can’t afford the loan repayment, but they do have a large amount of CFG they can dump for cash. More than likely they will do it to generate income to repay the loan. Now imagine 5-10 users having this problem in a short period of time. There could be a considerable drop in price for CFG disincentivizing other investors and punishing current holders.

What I think would work is using CFG to capture the protocol value, the fee structure could be designed so that the protocol fees are collected and distributed with certain percentages going to different vaults mainly one to the team managing the development and maintenance of the protocol and one for CFG holders. The CFG token could then be redeemable for a certain amount of vault value. This would give CFG underlying value and I think it would be less likely to see severe price dumps. Instead we would probably see more and more of it being used to redeem the underlying value from the designated vault. The redeemed CFG could be burned or taken out of circulation to further increase the value of the CFG token. This strategy may prove to be a hinderance to other functions of the chain. But it may be resolved by allowing a selection of other tokens to pay the gas fee similar to how Karura does, where any token can be used for gas fees but transactions are cheaper using CFG. I’m sure there are some kinks to work out with this idea but the general concept is that CFG accumulates if value from fees charged when opening a loan, servicing it, and transferring it (I guess proportional to the loan size). I don’t think there should be a fee to close a loan. This strategy would reward all holders and may open the door to self-repaying loans which I’m sure the borrowers would be interested in. The tokens should probably be burned rather than being taken out of circulation if there is no max supply. Transactions can cost a fraction of a CFG if the price and supply dictate it. If we can give CFG tangible value other than gas fees the borrowers are more likely to give the token value and not dump it. This underlying value would also open up CFG to more defi opportunities in essence making CFG a money lego. Thus collecting fees in stablecoins is critical to the aforementioned strategy.

Acquiring external insurance should be done in addition to any internal protection measures. This would diversify the risk and possibly create a plan A and plan B should an unforeseen situation arise. I hope this help guide the community to the right decision. I can’t be here everyday without getting paid and I’m sure that many others are in the same boat. Therefore I do agree with a delegation of CFG or at least the attached voting power to a group of qualified “loan auditors” however they need to be held accountable for their actions and need to be regularly vetted to ensure there are no conflicts of interest while performing their duties. For example voting to accept certain loans because of receiving bribes or having personal/business connections to the borrower.

Please don’t over burden CFG holders with too much maintenance for their investment. Also the voting power should remain in control of the CFG holder, so that if there is a decision made they don’t agree with they can vote differently and the vote will immediately count, so no cool down time period for CFG holders overruling the vote done by their selected “loan auditor”

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Hi benruggedafewtimes. Thanks for your comment, feel free to add your contribution to the RFC protocol fees where all input will be considered for the final proposal :raised_hands:

The fee threshold idea that Kevin Chan (@BlockTower) mentions here is a very good one.

There is little value in collecting fees from pools looking to gain traction and once they have traction, fees shouldn’t impact them. Should be fairly easy for issuers to incorporate into their model.

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