Good question, I think
Agree on that most holders would probably lack the experise knowledge to do so. It reminds me of the prediction markets (Zeitgeist are working on)
This is a great way to look at it, I’m working with a client right now who is having issues with this very concept; hard to let any holder of your token vote on complex financial decisions without the requesite background knowledge. Proven delegates with the knowledge should be allowed to “run” for delegation and get tokens delegated to them.
Hi everyone, I had a few thoughts on the CFG Utility Proposals! I agree with the concept of Proposal #1 that the CFG tokens need to earn some type of fee from the platform. However, I am not sure if transaction fees are the best way to do it… let me explain my thinking:
Question: Does Centrifuge want to be ‘the defi stock exchange of real world assets’ or ‘the defi asset manager of real world assets’?
A stock exchange will allow any company to list on its exchange provided they meet the minimum size and provide audited financial statements, regulatory compliance, etc. The stock exchange does not make a judgment or recommendation to investors about whether the company is a good or bad investment. It just collects annual fees for listings and corporate actions. Exchanges earn a fixed annual fee plus some service fees.
An asset management firm curates the investment funds on its platform and it provides an implicit recommendation that its investment funds are a good investment. An asset management firm frequently doesn’t manage the investment funds itself but contracts a Sub-Advisor to manage the investments while they take care of the operations. An asset management firm earns a management fee that is a percentage of its assets under management (AUM) which is equivalent to Tinlake’s total value locked (TVL).
I think Centrifuge should be an asset manager. This is because defi Real World Asset investing is so new that investors need the guidance of an asset manager to offer a curated list of good investments. Because of this, I think a management fee would be most appropriate. I think 1% of TVL per year would currently be fair.
I also think this should be charged to investors in a stablecoin and not in CFG tokens. CFG tokens are the equity of the Centrifuge platform and I don’t see how they could be used for fees. Apple doesn’t sell iPhones for a set number of Apple stock. The CFG tokens should then pay out the excess stablecoin earnings to the CFG token holders like a dividend.
This brings me to Proposal #2:
Since I think Centrifuge should be an asset manager who does the due diligence on Asset Originators and decides who gets listed on the platform there is no need for staking CFG to determine which pools get launched (which I agree with the above comments sounds like the blind leading the blind). Instead, I think staking could be used as the mechanism to payout the management fee’s earned by the platform to the token holders. You stake your CFG and daily accrue your cut of the management fees in a stablecoin like Dai or USDC. That would be cool!
If you read this far thank you for your time and I hope to be more active in the community going forward. I do sincerely believe Centrifuge could be a massive disruptor to traditional financial markets and enable entrepreneurs in the real world to solve more of the world’s problems.
Greetings. I think the comment above is the only one left on the merits of the post.
Of course, the average layman will not be able to make an informed financial decision about the pool. The idea with validators (professionals) seems to me the most acceptable. Humanity has not yet come up with anything better than delegating the powers of an illiterate crowd to more literate representatives. Any parliament has been working this way for hundreds of years.
In addition, the Goldfinch project had a very interesting experience. They trained their representatives, taught everyone how to properly evaluate the pools, and during the competition the most capable validators were selected. I think this is a useful experience.
Has a fee structure been proposed for the pools? We recently submitted a POP and received a 7/10 score (POP Criteria Score: UrbanGate Capital).
I would love to know how the fee structure is structured or if it is still in the proposal mode. Thanks!
Hi @Will_Coleman, the proposals mentioned in this post have not been implemented - the purpose of this post is to get feedback on these features.
There will be a proposal (CP-4) once it is ready and the token holders will have to vote on it. There is no specific ETA.
Thank you for the quick response! Is it accurate that the current pools are not being charged any transaction fees in both instances when the investor invests into a pool and when the borrower pulls capital from the pool to lend on the RWA?
You pay transaction fees in ETH when you interact with the smart contracts (for example when you invest/redeem) - but you don’t pay CFG as the transactions take place on Ethereum.
This will change once pools launch directly on Centrifuge Chain - fees will be paid in CFG (hence the proposal for protocol fees) and will be much cheaper compared to the ETH gas fees currently being paid.
Okay this makes sense, thank you!
I’m curious how does Centrifuge make its profits in this model if you aren’t directly charging transaction fees for profit? Does Centrifuge profit through the DROP and TIN tokens increasing in value and through fees that are sent to the Treasury?
If that’s too intrusive of a question I apologize! Just trying to better understand the flow of everything. Thanks!
These are fair questions, and I’ll gladly provide the answers.
You are right, that Centrifuge does not profit from the current setup. Centrifuge has had 7 funding rounds since 2018, and the most recent one took place this month with investors such as Coinbase Ventures, BlockTower Capital, L1 Digital and Scytale Ventures.
I personally hope that we can find a model where we are self-sustainable in the long - but that is outside the scope of the proposal in this post, so that is a topic for another post. The implementation of protocol fees could be a good start in that direction though, in my opinion.
If you are interested in some of the milestones of Centrifuge since 2018 - including the funding + partnerships - you can check this post.
Thank you for the transparent answers! I look forward to onboarding a Pool with you guys and continuing to being a part of the ecosystem
That would be great!
A new post has been created to get more input on the Protocol Fees separately.
Please go here to take part in the discussions.
Great stuff thanks for sharing
Disclaimer: not an expert yet but doing my best. Feel free to comment (:
amazing to see the suggestion is on the right track with the comments of friends from community.
Trying to add:
- Staking machnizm is great.
- Implementation of Fees is great- must be low: I understand this means we will have low APY till we have some traction and adoption. This is normal. Staking profit to me is profit sharing. When we grow and in bull market the numbers will go up.
- Big picrure:
I guess main issue that brought this suggestion is about staking… 2 ellements:
a. Small APY to protect from dilution/inflation (emmisions/vesting of locked tokens)- this point is short term and less relevant for me at this stage.
b. Profit sharing model: what percentage of the revenue will go to stakers.
in “pure” POS (like ETH) its obvious the stakes gain APY. In our case (NPOS), we have security recieved from collators and polkadot relay chain and stakes which get their APY…
I think this is a big question for all the Polkadot ecosystem… I didn’t really think about it before. It’s a matter of finding the right balanced formula between protocol revenue and how it is devided between: parachain rewards, protocol insurance fund, treasury (marketing to incubating and on boarding new projects funds), staking, pools, etc.
I would love to see an excel (willing to give my time and help with this and support) and be able to see full vision for future profit sharing model including all elements and everything we know by now.
IMO, revenue should be divided in the area of: crowd load 35%, staking 25%, treasury 25%, insurance 2.5%, misc 12.5% (can always be adjusted…).
We need to find best balance for the success of Centrifuge & Centrifugians (community and CFG holders).
I fully support this proposal. I would also like to see a clear and simple Excel spreadsheet, where it will be clear how the profit is distributed.
Hi pupking. The proposal to implement Protocol fees passed already. Details on the fee structure can be found below
Using CFG for both yes? I find that native protocol tokens that have lots of tangible uses for their native token have better price action and more innovation due to that. Especially with a platform tech such as centrifuge that has the potential to be the mother of all protocols. With regulation around the corner it would be wise to pass whatever token model before then after, not to mention it will increase in market share most likely because of.
I think #2 in that proposal is an important step to decentralization. But instead of direct democracy it should instead be used to nominate decision makers. Everyday users can’t be expected to be able to evaluate pools.
I also support charging fees, but they need to be kept competitive. In the interest of keeping things frictionless for borrowers though, I don’t think it matters if they pay in cfg or if they pay in stables and we swap to CFG on the backend.
Similarly, I worry about the friction borrowers would experience if we required locking cfg. We are basically saying “if you want to use our venue to raise money, you have to be long CFG”. No tradfi venue would make you do that, and I’d want to avoid things that make our product less attractive. We need to draw in more real world assets at this point, and we won’t do that by making them hold a token.