I’d like some combination of both: increase the base price (or scale it with the number of domains owned by a single entity?) but have some kind of grace period based on the time you’ve held it where you accrue a charge with interest (to prevent squatters abusing it) but can get it back quickly if you pay in full.

If a business screws up, paying a few grand in late fees is much better than losing it to a squatter and that can protect users from someone malicious buying a domain used by an app or something.