They call it a new kind of felt. It's recycled fleece. It's soft and I doubt it would scratch the iPad. It feels like it polishes my iPad every time I put it in and take it out. I think you made a good choice in the color. I love mine.
If it fits with the smart cover on it, is it still a snug fit with a naked mini? I just hope it doesn't wobble around in the case without any protection