Saw this post by “benruggedafewtimes” in another Governance discussion re: fees and I thought it was valuable so let me paste it here since he didn’t
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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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