This is a good set of questions and require an equally articulate set of answers.
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There is explicit reference to the Genesis team as the team who will take care of implementing the proposals in the initial phase of the governance. This is done on purpose to bootstrap the first phase of the governance decentralization. Although i personally love compound governance (which you are implicitly referring to as the one that allows anybody with enough voting power to submit executable proposals), their model works because their governance focus on small parameters change which don’t necessarily requires large change to the protocol, the goal here is to make sure that if a big change to the Aave protocol is proposed as an AIP, the genesis team is involved in reviewing code and in the implementation of the smart contract proposal for security purposes. The Genesis team is not the main developer going forward but is a facilitator to implement big changes to the protocol while being compliant to the existing code base during a time where everyone gets familiar with it. What it means is that anyone can propose changes as AIPs with very big upgrades to the protocol but following a particular process. Once those smart contract are audited and reviewed the Genesis team will facilitate the implementation and put the contract to the vote, without opinion on the content of the proposal but, as a smart contract implementation facilitator. Eventually the Genesis team will be deprecated as risk and audit team are incentivized to fully contribute to the protocol but it would not be smart to not take advantage of the in-depth knowledge acquired by those who architecture the protocol for the sake of apparent decentralization.
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Correct. Similar to the recovery procedure of Maker, the last resort to rescue the protocol is an one time emission of AAVE to cover the debt. That’s extremely important to guarantee that even if the protocol isn’t completely covered by the Safety Module, there is still margin to avoid having the protocol completely underwater. Although some holders might turn their nose up at it, it’s important to understand that if there isn’t Aave protocol, there isn’t AAVE. Eventually this comes as a great incentive for the community to take proper governance decisions and avoid unnecessary risks.
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To understand this choice it’s important first to understand how Balancer works under the hood. Balancer architecture is quite different compared to, for example, Aave or compound: When we say “Deposit to Balancer” what we actually say is “deposit into a very self contained contract, separated by the other ones, that has risk related to that contract itself and the tokens contained in it”. So it’s substantially different from providing liquidity to Aave, where all the liquidity is shared. In the case of the safety module, the Balancer pool will be a specific pool contract, customized by us and under the control of the Aave governance, that will be also audited by us prior to the deployment. So can be considered by all means a contract that belongs to the Aave ecosystem and that leverages the Balancer technology. This is a very important aspect to understand - there is no intrinsic risk of “Balancer getting hacked” rather the “Contract where AAVE are deposited getting hacked”. It’s worth to note that of course we reviewed internally the Balancer contract that we are going to use. Their pool contract is relatively easy to understand and with little additional smart contract risk.
As for the benefits of having part of the stake as an AMM, i would suggest the proof of liquidity paper https://www.placeholder.vc/blog/2020/5/22/proof-of-liquidity that very well explains how pure staking systems suffer from price manipulation, low market depth and extreme volatility. That is of course, besides the additional yield farming and fees that stakers will unlock.
Also mind that the implementation is not tied to Balancer - it will also possible deposit plain AAVE, that will be locked in the Aave SM contract, or in the future add multiple AMMs underneath - it’s very flexible. -
burning will remain active and the Aave governance will decide how to handle the fees.