Raids should be able to drop loot on par with Flawless loot. Maybe for raid challenge completions only or something, it really doesn't matter. Raid loot should be good loot.
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Horrible idea if it's exclusive to Top Tier PvP or Raid players: They need to do it for each type of activity. Hardest challenges for each would make the best since for PvE. For example, they could be rewards for master and Grandmaster nightfalls.