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If it's the stuff I'm thinking of, it doesn't dry out very well. Bacteria, mold, etc. If you are planning on using it on the inside, I would think it can't be good for their claws. That stuff doesn't give if he gets caught and will end up pulling out nails.....
I agree, I don't think that the material would dry out very well. It would just be like having a damp moldy towel in the cage. There are a lot of different things you could use that would also make the cage look more natural.