Taiko is striving to become an L2 that is equivalent to Ethereum, a completely decentralized L2, and an L2 that prioritizes developers.

Author: FourPillar

Translation: Deep Tide TechFlow

Ethereum was launched in 2015 with the aim of fully leveraging the potential of blockchain technology through smart contracts and decentralized applications (dapps). However, with the rapid growth in the number of users and transaction volume on the Ethereum network, it encountered serious scalability issues.

Initially, the number of transactions on Ethereum was relatively low, so the blockchain's processing capacity was not a problem. Users could process transactions quickly and at low cost, and the network operated stably. However, as Ethereum's popularity rapidly increased, various dapps such as DeFi, games, and NFT markets emerged, leading to a surge in the number of transactions. As a result, the time it took to include transactions in blocks increased, and transaction fees significantly rose. This was particularly burdensome for users who needed to conduct small transactions or require fast transaction processing.

To address the scalability issue, the Ethereum Foundation and the community explored various solutions. Among them, sharding is a prominent solution. Sharding is a scalability technology that divides the blockchain network into multiple smaller "shards," significantly increasing transaction throughput. Similar to how multiple computers can process tasks simultaneously, sharding enables the Ethereum network to process more transactions quickly and efficiently. Ethereum plans to introduce this technology to greatly enhance the network's processing capacity.

Although this technology is highly anticipated, due to concerns about centralization and the technical challenges that cause development delays, Ethereum shifted from directly implementing sharding to the Layer 2 approach.

With Ethereum's comprehensive adoption of L2 solutions, multiple Ethereum L2 projects have emerged. This article will introduce Taiko, one of them, which has a unique development direction different from many other Ethereum L2 projects. Because Taiko aims to comprehensively address the problems faced by existing Ethereum L2, before delving into Taiko, let's first explore the development history of Ethereum L2 and the problems it encountered.

1. The heyday of Ethereum L2 blockchain

1.1 The rise of Ethereum L2 blockchain: Different approaches and philosophies

Ethereum Layer 2 refers to blockchain infrastructure aimed at increasing transaction processing speed and reducing costs while maintaining the security of the Ethereum mainnet (Layer 1). The most well-known types of L2 include Plasma, Optimistic Rollup, and zk Rollup. Ethereum L2 projects began developing their own Ethereum L2 blockchains based on their respective methods, philosophies, and beliefs, all pursuing the common goal of solving Ethereum's scalability issues. As a result, users enjoyed lower costs and faster transaction speeds. However, was this a problem of direction or speed? As the Ethereum L2 blockchain rapidly expanded, Ethereum and its scalability issues began to take a back seat.

Fundamentally, the creation of Ethereum L2 was to address Ethereum's scalability issues, but many projects began to focus more on promoting their mainnet and neglecting to solve the core problem. Many Ethereum L2s chose to deliberately reduce their connection to Ethereum and only provide minimal value association through bridging, or even in some cases, not support it at all. This led to the emergence of independent blockchains that were effectively unrelated to Ethereum.

For example, Blast launched its mainnet on February 29, 2024, initially emphasizing its positioning and philosophy as an Ethereum L2. However, at some point, it began to refer to itself as a "full-stack chain," gradually distancing itself from Ethereum. Blast's official account on X (formerly Twitter) changed from @Blast_L2 to @blast, and this was not accidental.

Source: Jim X

This indicates that despite many Ethereum L2s claiming to value their connection to Ethereum and commit to expanding its scalability, it seems that no true Ethereum L2 can fulfill its promise to collaborate with Ethereum. So where exactly is the problem?

1.1.1 Decreased connectivity with Ethereum

Many L2 solutions increasingly focus on their unique features and functionality, leading to a gradual decrease in connectivity with Ethereum. This intent to establish an independent ecosystem stems from the pursuit of autonomy. However, this independence may hinder interoperability with the Ethereum mainnet, making it difficult for L2 and Ethereum to achieve seamless interaction. As a result, L2 blockchains, originally created to address Ethereum's scalability issues, ultimately weaken the overall integrity of the network. This deviates from the original intention of Ethereum's scalability solution and may cause chaos in the entire Ethereum ecosystem.

1.1.2 Centralization for efficiency

Some L2 projects have adopted centralized means in pursuit of efficiency. While this approach may improve performance and reduce costs in the short term, it undermines the fundamental principle of decentralization in blockchain technology. This may damage the trust and security of the technology in the long run. Additionally, a centralized structure creates single points of failure, increasing security vulnerabilities and posing significant risks to users and developers.

1.1.3 Neglecting developers' needs

As L2 projects build their ecosystems, they often bring trouble and burden to developers. Because each L2 project adopts different technological approaches, developers are forced to learn and adapt to multiple platforms, setting a high barrier for developing new dApps or porting existing dApps to L2 blockchains. Furthermore, due to the lack of standardized protocols between L2 blockchains, developers face the challenge of modifying code to adapt to different infrastructures. This not only reduces the efficiency of developers but also hinders innovation and growth within the Ethereum ecosystem.

L2 projects may argue that they have no choice but to make these decisions to expand their ecosystems and obtain funding. However, this trend ultimately weakens the security of the Ethereum mainnet and has a negative impact on the entire Ethereum ecosystem.

1.2 Returning to the essence

Source: Vitalik Buterin warpcast

In July 2024, Ethereum founder Vitalik Buterin published an article criticizing the excessive investment in infrastructure in the blockchain industry. Vitalik pointed out that this excessive investment stemmed from investors indirectly channeling funds into technology rather than directly investing in tokens to appease their moral conscience. His observation seems to align with the disorderly emergence of L2 projects. Due to a large influx of funds into infrastructure, some projects focused solely on profit rather than the narrative of Ethereum's scalability, causing Ethereum and its scalability issues to gradually fade from the L2 narrative.

Of course, investment in the L2 ecosystem itself is not a bad thing. Capital is crucial for the operation of projects. However, this capital should not be the top priority. The most important thing is to focus on the problems that L2 solutions are trying to solve and how they intend to achieve these goals.

L2 projects must remember their original goal of solving Ethereum's scalability issues. Maintaining interoperability with Ethereum, adhering to the principle of decentralization, and providing an environment where developers can easily participate are crucial. If L2 solutions fail to achieve this balance, not only will the development of the Ethereum ecosystem be threatened, but the long-term trust and security of blockchain technology will also be at risk. When L2 projects return to their core principles and work closely with Ethereum to solve its scalability issues, true progress in blockchain technology will be achieved.

2. Taiko: A True Ethereum L2

So, what factors are needed for an Ethereum L2 to truly solve the scalability issues of Ethereum? There are three key points: 1) Is it fully integrated with Ethereum? 2) Is it completely decentralized? 3) Does it fully consider the needs of developers in the Ethereum environment? Let's examine Taiko's efforts to become a true Ethereum L2 based on these factors.

2.1 Ethereum Equivalent L2

Solutions to Ethereum's scalability issues must naturally integrate closely with Ethereum. Here, integration not only refers to system-level integration but also includes value integration and even ideological integration. Of course, "integration" does not mean complete similarity or duplication in many aspects. However, this is an important characteristic required to become a true Ethereum L2, as many blockchains running as Ethereum L2 do not follow these basic principles.

2.1.1 Type-1 EVM Blockchains

On August 4, 2022, Vitalik Buterin published The different types of ZK-EVMs, analyzing and categorizing zkEVMs. According to his analysis, zkEVMs are classified into Type 1, 2, 2.5, 3, and 4, where a higher number indicates lower interoperability and compatibility with Ethereum but higher efficiency in generating proofs and overall performance. In other words, higher-numbered zkEVM types involve changes such as modifying the EVM core or introducing additional modules to optimize performance.

While Vitalik pointed out in the article that no zkEVM type has a clear technical advantage and they may coexist, he concluded at the end of the article:

"As for me, I hope that over time, through improvements to ZK-EVMs and Ethereum itself, it becomes more and more the case that everything is Type 1." - Vitalik Buterin (Ethereum Founder)

Ultimately, in the trade-off between interoperability and performance, Vitalik chose interoperability for Ethereum's scalability.

Although this article was written in 2022, it is still worth reflecting on in the context of the current proliferation of Ethereum L2 blockchains. To truly operate as an Ethereum L2 blockchain, the ultimate goal should be to achieve a Type-1 zkEVM.

While Vitalik's article only classified zkEVMs, from a broader perspective, the structure of L2 itself can also be extended to types of EVM or L2 based on whether it is fully integrated with Ethereum. From this perspective, Taiko aims to achieve Ethereum's scalability by using a Type-1 EVM that is equivalent to Ethereum.

Because Taiko aims to be an equivalent L2 blockchain to Ethereum, it inevitably has relatively lower performance compared to other types of Ethereum L2 blockchains, such as Type 2 or Type 3. However, considering that other L2 blockchains mentioned earlier have not fully committed to Ethereum's scalability, this trade-off is reasonable. It is worth noting that this is not a major issue, as the Taiko team is aware of this and explicitly aims to improve performance deficiencies through internal protocol design.

2.1.2 Based Rollup

Source: MEV for "Based Rollup"

Taiko not only fully integrates with Ethereum's system infrastructure but also strives to align with Ethereum in terms of security. Taiko adopts a concept called Based Rollup, which operates without the need for a centralized sequencer. Instead, Ethereum's validators also act as Taiko's sequencers, responsible for sorting transactions and blocks. With these features, the fragmentation of the Ethereum ecosystem has the potential to be reintegrated into a whole.

Based on the Based Rollup feature, Ethereum's block proposers become Taiko's sequencers. This role comes with specific responsibilities, including maintaining their profits as beneficiaries of Taiko's MEV (Maximum Extractable Value) and maintaining the activity of sequencers. This additional incentive mechanism encourages them to operate more cautiously.

2.2 The Path to Complete Decentralization

From a systemic perspective, decentralization is a complex and inconvenient concept. Frankly, if everything is handled and managed by a single center, efficiency would be higher and maintenance simpler. Therefore, many Ethereum L2s have chosen a centralized sequencer model. However, this approach has flaws, such as the potential for malicious sequencers to censor transactions or exacerbate single points of failure. In this case, who would trust this system? The birth of the blockchain industry is precisely because no one can be fully trusted. To eliminate these potential risks, achieving complete decentralization is crucial.

Source: Based Contestable Rollup (BCR): A configurable, multi-proof rollup design

What conditions are needed to achieve complete decentralization? Taiko has thought about this issue and introduced Based Contestable Rollup (BCR). The key to avoiding centralization is to ensure multi-party participation, prevent collusion, and encourage competition. Taiko's adoption of BCR is a rollups protocol with a competitive mechanism, which plays a role in rollups proof and sequencing, covering all necessary elements.

"34,469 lines of code are hard to get right for a long time." - Vitalik Buterin

The reason Taiko chose the BCR structure is to achieve complete decentralization. Vitalik Buterin pointed out that zk-SNARKs are currently not a completely reliable technology. In particular, the latest zk-SNARK systems have become significantly more complex, greatly increasing the likelihood of errors. As this technology is not yet mature, it is expected to become even more complex, making technical errors more likely. When there are such vulnerabilities, centralized rollups can prevent serious problems from worsening because there is an entity responsible and able to address any technical errors or specific risks. However, Taiko pursues a completely decentralized environment, making it difficult to explicitly address these issues. Therefore, Taiko avoids relying on the structure of blindly trusting zk-SNARKs. In other words, through the BCR structure, Taiko is prepared to address the possibility of errors in rollups proofs and has established a system to challenge erroneous rollups proofs.

To understand how Taiko's BCR operates, a simple example may be more effective than a complex explanation.

Alice proposes a new block.

Bob submits a proof of state transition from H1 → H2. H1 is the parent hash, and H2 is the hash of the new block. Bob stakes 10,000 TAIKO as a security deposit. His proof enters a challenge period.

Bob's proposed state information and additional proof are publicly disclosed.

Cindy believes that Bob's state transition should be from H1 → H3, not H1 → H2. During the challenge period, Cindy stakes her 10,000 TAIKO as a competitive deposit and challenges Bob's proof.

The disputed state transition between Bob and Cindy awaits a higher-level proof during the challenge period. This higher-level proof allows Bob and all other provers the opportunity to challenge it.

Scenario 1 - If Bob's proposal is correct:

David verifies Bob's H1 → H2 proposal and proves Bob is correct. David receives 2,500 TAIKO as a reward for completing the higher-level verification and becomes the validator of H1 → H2, staking 20,000 TAIKO as a deposit.

Cindy loses her entire deposit for proposing an incorrect modification.

Bob retrieves his original 10,000 TAIKO deposit and receives an additional 2,500 TAIKO as a reward for proposing the correct solution.

David's new proposal and the challenge period begin.

Scenario 2 - If Bob's proposal is incorrect and David proposes a new solution:

David provides a three-step transition proof from H1 → H4, proving that Bob's transition is incorrect. As a result, David receives 2,500 TAIKO as a reward and stakes 20,000 TAIKO as a deposit to support his modified state information and proof.

Cindy retrieves her original 10,000 TAIKO deposit and receives an additional 2,500 TAIKO as a reward for successfully challenging Bob's incorrect state transition information.

Bob loses his entire deposit for proposing incorrect state transition information and proof.

David's new proposal and the challenge period begin.

This structure incentivizes rollup verifiers to maintain responsibility during challenges through competitive deposits and prevents unnecessary attacks. It is worth noting that as the verification rounds increase, the deposit required for competition significantly increases, preventing unnecessary competitive rounds.

Additionally, Taiko adopts multiple proof systems in BCR. This system allows for the use of different rollup verification systems (such as SGX, ZK, SGX+ZK, etc.) at different stages to ensure the system's flexibility and more stable operation. Despite these advantages, this design also has a drawback: insufficient activity of verifiers when competition frequency is low. Verifier mechanisms need a significant amount of competition to profit, so in an environment with low competition, they may choose not to participate. To address this issue, Taiko implements dynamic adjustments to different rollup verification systems to overcome this challenge.

In the early stages of service, there may be low competition frequency. To address this situation, a group of verifiers called Guardian Provers will use a multi-signature scheme as a security measure until the system matures. As the system gradually matures, their role will diminish and eventually disappear to achieve complete decentralization.

2.3 Built for EVM Builders

The various features of Ethereum L2 and a more decentralized L2 are attractive and necessary. However, we often overlook a key question: why does Ethereum L2 exist? Who are they designed for? The answer is simple: they exist for ecosystem participants who want to use these Ethereum L2s. Among them, developers who attract a large number of users and drive the development of the entire L2 ecosystem are particularly important. However, in this golden age of Ethereum L2 blockchains, a large number of infrastructures with their own rules have emerged. This situation is like operating the same service in countries with different laws and regulations, requiring a significant amount of unnecessary time and money to deal with the differences.

To help developers concentrate resources effectively on service development, we need to standardize rules and narrow the gap between infrastructures. Introducing infrastructures that have been historically verified or widely used by many developers is crucial. Yes, we need to introduce infrastructures used in the Ethereum environment. This will enable developers to leverage the methodologies and expertise they have accumulated on Ethereum, making it easier to integrate into Ethereum L2 blockchains.

"Taiko can only make a difference in this world by helping others change the world." - Taiko Labs

In this regard, Taiko demonstrates a true commitment to developers. As stated in Taiko's blog post, Taiko will benefit from allowing ecosystem participants, especially developers, to work freely. To fulfill this commitment, Taiko continues to make all development open source and adopts a framework called Based Booster Rollup (BBR) to help EVM developers transition faster and easier.

BBR is an extension of the advantages of Based Rollup from the developer's perspective, exploring how to apply the advantages of Based Rollup to the application layer of blockchain core infrastructure. Through Taiko's BBR, developers only need to deploy their dApp once on L1 Ethereum to achieve automatic dApp deployment on all L2s without additional work or resource investment.

3. Taiko's Vision: Integrated Infrastructure and Community for Ethereum

We have discussed the direction that Taiko is pursuing. Although three powerful ideas form the foundation, ideas alone cannot bring about significant change in the industry. These ideas must be implemented on a planned schedule to benefit others, create a virtuous cycle, and become disruptors in the industry. So, let's look at how Taiko intends to become a disruptor in the industry from the past, present, and future perspectives.

3.1 Integrated Infrastructure for Ethereum

One of the key pillars is infrastructure. As the cornerstone of becoming a true Ethereum L2, Taiko is leveraging multiple technological advantages to build this infrastructure. Let's take a look at how Taiko's infrastructure has evolved over time.

3.1.1 To Date - From Taiko Testnets to Mainnet

Taiko did not attempt to achieve all goals simultaneously. To achieve the significant milestone of launching the mainnet, it conducted as many as seven alpha testnets, gradually preparing for the realization of Taiko's vision. Let's first take a look at the content of these seven stages of alpha testnets.

Alpha Testnet-1 (Snæfellsjökull)

All developers could deploy smart contracts, and users could use all Ethereum and Solidity tools just like on Ethereum, allowing everyone to conduct transaction tests. This version allowed anyone interested to run an L2 node and participate in block proposals. Taiko planned to run some nodes and propose blocks, inviting everyone to join. The testnet included a cross-chain bridge for asset transfers between the testnet and Ethereum, as well as a block explorer to check transaction history.

Alpha Testnet-2 (Askja)

This was the first successful testnet to run through a proof mechanism open to everyone, establishing the foundation for this version's full decentralization. Additionally, blockchain network monitoring and alerting features were implemented, and developers could directly deploy their decentralized applications (dApps) to this testnet without modifying the code used on Ethereum.

Alpha Testnet-3 (Grímsvötn)

This version established and implemented a token economic model based on a new fee and reward model. It also included the necessary proof cooling mechanism in the proof mechanism and preliminary testing of Taiko L3's foundational layer.

Alpha Testnet-4 (Eldfell L3)

In this version, the initial layer of L3 was deployed for the first time, and the concept of rollup-on-rollup was introduced. As Taiko is fully integrated with Ethereum, it essentially views L2 as L1 and attempts to expand to L3. Additionally, a new stake-based verification mechanism was introduced to prevent centralization of verifiers and ensure they receive fair rewards.

Alpha Testnet-5 (Jólnir)

This version introduced a new proposal and verification implementation based on proposer-builder separation (PBS). PBS is a series of economic mechanisms involving proposers and verifiers aimed at ensuring the decentralized nature of block construction. Unlike previous testnets that did not introduce this aspect, the block construction in this version followed an open market model.

Alpha Testnet-6 (Katla)

The initial version of BCR (Blockchain Consensus Rule) was implemented in the sixth testnet, testing and preparing for Ethereum's latest updates (such as EIP-4844), although these updates were not yet activated. Additionally, the cross-chain bridge was updated, and the blockchain explorer was enhanced to provide more comprehensive information.

Alpha Testnet-7 (Hekla)

The final testnet Hekla focused on activating EIP-4844, which had been prepared in the previous testnet. This was successfully implemented and adopted the new rollup storage mechanism Blob on the Ethereum mainnet. Additionally, this testnet version introduced some improvements, including adjustments to L2 block gas issuance, activation of snap sync, and modifications to EIP-1559 settings. Based on the features applied and tested in this version's testnet, the mainnet is now ready without any issues.

Source: Taiko Mainnet #1 Block

Taiko Mainnet

The content of the blockchain network verified and protected during the testnet period is now released to the world through the mainnet. It is worth mentioning that Ethereum founder Vitalik Buterin immediately generated the next block after the genesis block, adding significance to it. General users can transfer ETH from Ethereum to the Taiko mainnet using the cross-chain bridge and directly interact with decentralized applications (dApps) on the Taiko blockchain. In particular, developers can run nodes, propose and verify blocks, and actively participate in this highly potential Taiko blockchain. In terms of technology, Taiko introduces modules such as BCR and Raiko, reflecting its determination to become a true Ethereum L2.

3.1.2 Now - Pre-Confirmation and Multi-Proof Systems

As Taiko successfully launched the mainnet through six testnets, it has also been consolidating its internal structure to become a more advanced Ethereum L2. Two of the most significant developments are pre-confirmation and multi-proof systems, which we will explore in detail below.

Pre-Confirmation

Even after the mainnet launch, Taiko is still striving to inherit the security and determinism of Ethereum. However, this development also brings the risk that block proposers may face survival challenges due to lack of profitability. For example, in an ecosystem with scarce liquidity like Taiko, users typically offer low fees to block proposers, making Taiko's 12-second block time insufficient for any block proposer to be profitable. Therefore, Taiko Labs temporarily operates proposers without pursuing profits to prevent this situation. Without measures, the block time on the Taiko mainnet will continue to increase.

To address the profitability of L2 block construction, improve block time, and enhance data release efficiency, Taiko plans to introduce a concept called pre-confirmation. Pre-confirmation is a major focus of research and development in the second half of 2024 and will also play a crucial role outside the Taiko mainnet. Through pre-confirmation, L2 block construction can become more efficient and stable, allowing users to enjoy faster transaction confirmation speeds. Additionally, pre-confirmation can simplify and enhance the rollup structure by integrating the roles of L2 and L1 proposers. This is associated with a mechanism based on ordering, which may encounter difficulties in practical operation when considering the profitability of builders, initiating survival mechanisms, and configuring fast block times. However, if multiple pre-confirmation participants execute pre-confirmation, forks may occur on the Taiko mainnet. Therefore, despite some controversy, mechanisms like leader selection are being discussed as a practical compromise solution.

Multi-Proof Systems

Another topic of research and development at Taiko is the multi-proof system, which aims to integrate multiple clients and various verification systems. The multi-proof approach reduces the risk of vulnerabilities due to client implementation and verification system, ensuring that even if one verification method is compromised, other methods can prevent the same vulnerability from being exploited.

Source: Taiko’s Approach to Multi-Proofs ```

First, Taiko plans to establish an "open" multi-client system where each client can independently verify blocks. This allows users to choose their preferred client for block verification, bringing advantages in accessibility and scalability. Additionally, as a fundamental measure against single points of failure, it contributes to the secure operation of the mainnet. However, since this requires Ethereum (as the L1 network) to support multi-client functionality, Taiko plans to use a "closed" system that adopts multiple types of improved validators until full support is achieved.

Furthermore, Taiko operates a free-market-style multi-proof system where proposers seek verifiers, propose blocks, and verify using the verification system of their choice. Additionally, this multi-proof system emphasizes modularity and openness, allowing multiple clients and verification systems to collaborate in generating multiple proofs. To achieve this, Taiko is collaborating with companies such as Powdr Labs and Risc Zero to enhance interoperability between compilers and zk-SNARK systems and build a modular ZK stack.

The implementation of these concepts is referred to as "Raiko." Raiko supports multiple zkVMs and enhances security with the help of SGX. The system enhances the flexibility of block proofs through the ZK/TEE architecture and improves zkVM and TEE through standardized input methods. Taiko plans to continue integrating more zkVMs and expand Wasm zkVM. The system aims to provide a user-friendly and integrated environment for EVM-compatible block proofs.

3.1.3 Looking Ahead - Through BCR and BBR

Despite making significant progress, the goal of becoming a disruptor seems distant for Taiko. Ultimately, the path for Taiko to realize its ultimate vision largely depends on two core elements, BCR and BBR, which have been preliminarily implemented but still require further refinement.

While we have explained BCR and BBR above, let's revisit them.

BCR allows users and developers to propose blocks, run nodes, and deploy smart contracts just like on Ethereum, and introduces a dispute resolution mechanism to quickly address errors in rollups. This ensures the determinism and accuracy within the blockchain, making BCR the cornerstone of Taiko's core technology.

Source: Based Booster Rollup (BBR): A new major milestone in Taiko’s roadmap

BBR, based on Based Rollup, offers higher efficiency and comprehensive Ethereum interoperability. This allows users to use integrated dApps on all L2s without switching between them, and developers can deploy dApps once and have them automatically adapt to all L2s. Additionally, BBR addresses fragmentation issues in all rollups, significantly reduces transaction costs, and increases throughput. Therefore, Taiko believes that BBR has the potential to fundamentally expand the Ethereum ecosystem, and once this technology is applied, all users and developers in the Ethereum network can expect a better experience.

Taiko's mainnet aims to support developers, users, and builders, enabling them to operate flexibly and efficiently in the Ethereum environment, focusing on these two core pillars. However, as these pillars are not yet perfect, they need continuous development and improvement to become important technical components that help realize Taiko's vision. As these two pillars become stronger and more complete, Taiko will be able to set a new standard for L2, providing comprehensive Ethereum interoperability, full decentralization, and closer proximity to users and builders.

3.2 Community

Another important pillar is the community. To ensure that the platform established through its infrastructure by Taiko truly has value, community participation is crucial. To this end, Taiko is making efforts in multiple areas, including token issuance, token economics development, ecosystem activation, and governance environment establishment. Let's take a look at some of Taiko's efforts in these areas.

3.2.1 To Date - TAIKO Token Issuance and Distribution

After the launch of the Taiko mainnet, an airdrop of TAIKO, the native token of the Taiko network, was conducted. TAIKO is at the core of the Taiko economic mechanism and token economics, with a total supply of 1 billion tokens. The TAIKO token generation event (TGE) took place on June 5, 2024. The specific allocation is as follows: 11.62% of the total supply is allocated to investors, and 9.81695% is allocated to the Taiko Labs core team, as shown in the attached image.

The distributed TAIKO tokens have an initial lock-up period of 12 months. After the lock-up period, 25% of the locked tokens will be unlocked, and the remaining 75% will be gradually released over three years. This ownership structure is designed to minimize market volatility, encourage long-term participation in the Taiko ecosystem, and ultimately contribute to the success of the Taiko project.

The token liquidity release plan is explained in the above image, where green represents distributed tokens, yellow represents tokens to be distributed over 2-4 years, orange represents tokens to be gradually distributed over three years after one year online, and pink represents tokens allocated to protocol development, DAO governance, and the network, with a term of five years or longer.

3.2.2 Now - Expanding Taiko Ecosystem

Source: Introducing Trailblazers: Explore Taiko and get rewarded

Taiko's Trailblazers program is a loyalty program where users can earn experience points (XP) and claim rewards by participating in various on-chain activities on the Taiko mainnet. 10% of the total TAIKO token supply has been allocated to this program, and users can earn more experience points and level up by participating in activities. Certain NFT holders will receive an experience point bonus, and the program offers various activities and special events.

The program aims to encourage users to explore the Taiko ecosystem and actively engage with the community. Experience points can be earned by participating in activities such as cross-chain transactions, increasing trading volume, and proposing blocks on the Taiko mainnet. Rewards will be distributed at the end of each season based on accumulated experience points.

In addition, the Trailblazers program has launched a faction system where users can team up and compete within two factions (Based and Boosted). Users can collect badges associated with each faction, which bring additional experience points (XP) and other bonuses. At the end of the season, the faction with the highest XP will receive additional rewards. Developers can also participate in this program and earn rewards for the best-performing applications.

The Trailblazers program aims to attract more users to join the Taiko ecosystem and allow them to earn experience and rewards through various activities.

With the active support of Taiko, the Taiko ecosystem is growing rapidly. More detailed information about this will be presented in Chapter 4.

3.2.3 Starting Now - Achieving Full Decentralization Through Taiko Governance

To achieve full decentralization, Taiko will allow the community to participate in decision-making through a DAO. Major decisions will be made through voting by TAIKO token holders to determine the direction of the network's operations. However, Taiko's governance is still in its early stages and not fully active. Therefore, the first committee will be established by Taiko Labs, and the addition and removal of committee members will be decided by a vote from the Taiko DAO.

3.3 A Challenging but Progressive Path

Taiko is steadily moving forward, albeit not at a fast pace, towards its desired ideals and goals. Taiko particularly emphasizes being a user and developer-friendly blockchain, which is reflected in the growing Taiko ecosystem after the mainnet launch. In the next chapter, we will delve into the development of the Taiko ecosystem.

4. Taiko's Ecosystem

The Taiko ecosystem is a dynamic and collaborative space designed to create a highly "Ethereum" friendly environment for developers and users. Although still in its early stages, its goal is to provide the tools and support that Ethereum has. Key milestones include the Alpha-1 testnet in December 2022 and the mainnet launch in May 2024, which included a genesis airdrop and laid the foundation for community-driven development and governance.

An important project of Taiko is its grant program, which provides financial and other support to projects on the platform. By providing the resources needed to realize creativity, Taiko supports developers. Through these grants, Taiko not only helps individual projects but also strengthens the entire ecosystem, encouraging the development of products for the broader Ethereum community.

Next, let's explore the various components that make up the "Taiko ecosystem."

4.1 Taiko Organizational Structure

Source: What is Taiko? | Docs

The organizational structure of Taiko L2 consists of several key parts, each playing different roles in managing the Taiko ecosystem.

4.1.1 Taiko Management Entities

Taiko DAO

This DAO will be developed as the governing body of the Taiko protocol. TAIKO token holders will have voting rights to participate in decisions regarding smart contract upgrades and other network-related issues. This democratic structure ensures community control over all aspects of the Taiko protocol's smart contracts. Additionally, the Taiko treasury will be managed by the DAO, handling the income generated by the Taiko protocol and ensuring proper allocation of financial resources to support the protocol's ongoing development and operational needs.

Taiko Foundation

This foundation is responsible for managing the Taiko protocol and its ecosystem. It supports the Taiko DAO and token holders by providing transparent financial support for technical development, ecosystem growth, partnership agreements, and event organization.

Taiko Security Committee

Elected by the Taiko DAO, the security committee is responsible for addressing emergencies and taking necessary measures to ensure the security of the protocol. It oversees critical upgrades and changes, manages Guardian Provers, and ensures the integrity and security of the Taiko protocol.

4.1.2 Core Development

Taiko Labs

This is a team dedicated to the research and development of the Taiko protocol. Taiko Labs is committed to driving technological advancements to enhance the functionality and performance of the protocol.

4.1.3 Community

Taiko Community

This includes all social groups and accounts related to Taiko, such as Taiko Discord and Taiko Twitter. The community is the primary platform for communication, interaction, and information dissemination among Taiko enthusiasts and stakeholders.

4.2 Taiko Team Members

Co-founder and CEO - Daniel Wang

He is an experienced blockchain entrepreneur and technology expert, known for founding the Loopring Foundation, one of the early zkRollups built for decentralized exchanges. From 2017 to 2021, his leadership at Loopring made the protocol a significant player in the DeFi space, improving the efficiency of trading and payments. Prior to that, Wang held senior engineering positions at ZhongAn Insurance, JD.com, and Google, honing his skills in managing complex systems and large teams. At Taiko, Wang successfully raised $37 million in funding and is leading the project for Ethereum-equivalent zkRollups, aiming to scale Ethereum while preserving its core principles of decentralization and security.

Co-founder and COO - Terence Lam

He plays a crucial role in the company's strategy and operations. With thirty years of experience in the Web2 and Web3 industries, including experience at multinational Fortune 500 companies and numerous startups, Terence brings extensive experience to Taiko. He played a key role in securing $37 million in funding from prominent venture capital firms such as Lightspeed Faction and Hashed. Prior to joining Taiko, he was an associate professor at the University of Hong Kong and graduated from several renowned universities, including Harvard Business School.

Co-founder and CTO - Brecht Devos

He gained extensive technical experience at Loopring. At Taiko, Brecht played a key role in designing the technical architecture of Ethereum-equivalent zkRollups, including the innovative Competitive Rollup (BCR) and Boosted Rollup (BBR) designs. The architecture aims to simplify the Layer 2 value chain, reduce trust assumptions, and promote developer adoption. His leadership was crucial in successfully executing six testnets involving over 1.1 million unique wallets and an active developer community, preparing for the successful launch of Taiko's mainnet.

Chief Community Officer - Ben Wan

As Taiko's Chief Community Officer, Ben Wan played a crucial role in developing the largest crypto community on Discord, with over 1,000,000 members. His leadership was instrumental in the success of the Taiko testnet and the rapid growth of the mainnet. Ben's background in managing global IT projects for major multinational companies enables him to effectively guide and support Taiko's diverse and global community.

4.3 Ecosystem Overview

The Taiko ecosystem is being built in a community-driven manner, emphasizing an open-source development approach. Additionally, Taiko supports a variety of applications and tools across multiple domains, including DeFi, cross-chain bridges, and Web3 infrastructure. Due to its full compatibility with EVM, dApps on Ethereum can be more easily ported to Taiko, reducing risk.

Let's delve into this ecosystem, from infrastructure to user experience.

Source: Ecosystem - Taiko

4.3.1 Core Infrastructure

From the outset, the ecosystem prioritizes developer-friendly tools. Key partnerships with industry leaders have been established to provide core services: ANKR provides RPC, Covalent and Subgraphs provide indexing, Pyth and Redstone offer oracle solutions, and Tenderly provides developer tools. This suite of services ensures developers have access to highly reliable infrastructure from the earliest testnet stages. Here's an overview of the key projects involved:

ANKR

ANKR provides Remote Procedure Call (RPC) services, crucial for developers to interact with blockchain networks. RPC services facilitate communication between dApps and blockchains, enabling developers to efficiently execute commands and retrieve data. ANKR's infrastructure is renowned for its reliability and speed, crucial for seamless operations within the Taiko ecosystem.

Covalent and Subgraphs for Indexing

Covalent and Subgraphs provide indexing solutions, allowing developers to easily query blockchain data. Covalent offers a unified API that integrates data from multiple blockchains, making it easier for developers to access and analyze blockchain information. Subgraphs are part of The Graph protocol, enabling efficient queries through decentralized indexing services. These tools collectively provide the necessary infrastructure for developers to build data-driven applications and effectively access and utilize blockchain data.

Pyth and Redstone for Oracle Solutions

Oracles are core components in the blockchain ecosystem as they provide external data to smart contracts. Pyth and Redstone are two oracle solutions integrated into the Taiko ecosystem. Pyth focuses on providing high-fidelity financial market data, crucial for DeFi applications requiring real-time price information. Meanwhile, Redstone offers a flexible and decentralized oracle network, supporting various data feeds.

Tenderly for Developer Tools

Tenderly provides a suite of developer tools that optimize the development and debugging process of smart contracts. It features real-time monitoring, alerts, and advanced debugging capabilities, helping developers quickly identify and resolve issues. Tenderly's tools are particularly useful during testing and deployment stages as they allow in-depth analysis of smart contract performance and behavior.

4.3.2 Applications - DeFi

Since the mainnet launch at the end of May, the DeFi space has seen significant growth, integrating both established and native blockchain projects. Users can utilize various DEXs, including OKU (Uniswap V3) and native versions Ritsu and Henjin DEX. Other notable projects include:

iZUMi Finance (DEX)

iZUMi Finance is a multi-chain DeFi protocol that has extended its services to the Taiko blockchain, focusing on providing liquidity solutions. On Taiko, iZUMi Finance has launched iZiSwap, offering trading pairs and introducing features like limit orders in a decentralized manner. This expansion to Taiko aligns with iZUMi Finance's goal of supporting multiple networks and enhancing on-chain liquidity across various blockchain ecosystems.

KiloEx and DTX (Derivatives)

KiloEx and DTX are derivative trading platforms within the Taiko ecosystem. Both protocols offer hedging, speculation, and risk management tools, providing a range of derivative products including futures and swaps.

Deri (Options)

Deri is a decentralized options trading protocol within the Taiko ecosystem. It enables users to trade options, a financial instrument that gives the holder the right, but not the obligation, to buy or sell an asset at a predetermined price within a specific time frame. Deri offers various options contracts, allowing traders to hedge price volatility risks or speculate on future price movements.

XY Finance (Cross-chain Exchange)

XY Finance is a protocol within the Taiko ecosystem focused on enabling cross-chain exchanges. It allows users to seamlessly swap assets between different blockchain networks, enhancing interoperability and liquidity in the decentralized finance (DeFi) space.

4.3.2 Applications - Gaming

The gaming space offers diverse experiences, ranging from shooter games and MMORPGs to strategy and gambling games. Notable games include: Crack & Stack, Looperlands, 21BJ, Ultiverse, and EVM Warfare. This diversity reflects the ecosystem's commitment to providing engaging and innovative gaming experiences, catering to different player preferences and potentially attracting a large user base.

Crack & Stack

Crack & Stack is a game embedded within the Taiko blockchain ecosystem, blending puzzle-solving and strategic elements. Players strategically place blocks in stacking challenges to achieve specific goals or overcome obstacles. The game leverages blockchain technology to ensure fair competition and transparency, allowing players to earn rewards and compete with players globally.

Looperlands

Looperlands is an NFT gaming platform within the Taiko ecosystem, referred to as a "pixel universe," where players can play, create, and explore. It offers a metaverse experience, encompassing various games and activities, allowing users to interact with NFT assets. The platform emphasizes creativity and community engagement, enabling players to build their own worlds and experiences.

21BJ

21BJ is a game project based on the Taiko blockchain, bringing the classic card game Blackjack into the digital world. It provides a decentralized version, allowing players to compete in Blackjack against other players or AI opponents. Combining blockchain technology ensures transparency and fairness, as all game results can be verified on the Taiko network. Players can also earn rewards and participate in tournaments, making 21BJ a competitive and appealing choice for card game enthusiasts.

Ultiverse

Ultiverse is a large-scale Massively Multiplayer Online (MMO) game within the Taiko ecosystem, offering an interstellar navigation experience. It uses NFT assets as avatars, allowing players to explore a vast universe and engage in various activities. Ultiverse emphasizes social interaction and community building, providing players with opportunities to collaborate and compete in a dynamic digital environment.

EVM Warfare

EVM Warfare is a strategy game based on the Taiko blockchain, combining elements of warfare and resource management. Players engage in tactical battles, employing various strategies to outmaneuver opponents and achieve victory.

4.3.3 Applications - NFT

Native and mature NFT markets coexist within the ecosystem, providing diverse options for creators and collectors. Loopexchange is a native solution, while the OKX NFT Marketplace brings its mature market to the platform. Creator-centric tools such as NFTs2Me and Mintpad provide artists with the ability to mint and manage their digital assets. Notable series like Taikonauts, Taikoons, and Trailblazers Faction Badges have emerged, each with unique utility.

NFTs2Me is a comprehensive NFT creation tool designed to assist artists and creators by simplifying the process of launching NFT projects. It covers the entire NFT lifecycle, including creation, deployment, and contract management, providing users with an intuitive platform to manage their digital assets.

Mintpad

Mintpad is a user-friendly platform that simplifies the publishing and management of NFT collections. It handles all aspects from artwork generation to smart contract deployment and metadata generation, streamlining the process. Mintpad allows creators to design custom minting websites or embed minting functionality on existing websites, offering flexibility and ease of use.

Taikoons

Taikoons is a prominent NFT series within the Taiko ecosystem, known for providing significant advantages to holders, such as XP boosts for the Trailblazers Program. These NFTs enhance user experience by providing additional rewards and incentives for users participating in on-chain activities. Taikoons are highly sought after within the community, reflecting their value and importance in loyalty and engagement programs within the Taiko ecosystem.

4.4 Taiko Grants

Source: Grant Program – Taiko

The Taiko Grants program aims to support community projects that promote the Taiko ecosystem. It supports these projects by providing financial rewards and developer resources for their implementation.

Taiko Grants are divided into three tracks: Community, Partnerships, and Request for Proposals (RFP). The Community track supports builders and early projects on Taiko, encompassing diverse projects such as gaming, media, zero-knowledge proof (ZKP) applications, and artificial intelligence (AI). The Partnerships track supports mature projects with active user bases seeking integration with Taiko from crypto service providers. The RFP track is aimed at experienced builders or teams dedicated to high-impact projects requested by Taiko Labs, focusing on Taiko's protocols or ecosystem.

The grant program operates on a cyclical basis, with specific application open dates, deadlines, and review periods. For example, in the second cycle, the Community track applications opened on December 4, 2023, with a deadline of January 15, 2024, and the review will conclude on February 15, 2024. During the review phase, the grant committee evaluates proposals, provides feedback, and selects winners to kickstart projects. The program encourages projects aligned with Taiko's mission and supports open-source or public goods initiatives.

4.5 Latest Developments Since Mainnet Launch

Since the launch of the Taiko mainnet, various aspects of the network have made significant progress. Over the past 90 days, Taiko has seen substantial growth in network activity, profitability, user engagement, and technological advancements. In this section, we will examine these metrics.

4.5.1 Transaction and User Growth

Taiko's mainnet has experienced growth in network activity, surpassing over 100 million transactions. This surge in activity is further reflected in the network processing up to 2,000,000 transactions per day, demonstrating its robust capacity and increasing adoption. The expanding user base is evident by attracting over 1,000,000 unique wallet addresses, reflecting strong interest and participation in the Taiko ecosystem.

4.5.2 Profitability and Decentralization

One notable achievement since the mainnet launch is the decentralization and profitability achieved by proposers of Taiko Labs. This milestone disrupts the current understanding of Ethereum and opens up new possibilities for Ethereum scaling solutions. Despite previous losses, Taiko is steadily moving towards profitability with more dApps going live. The coming months will be a crucial period to observe.

Source: Onchain Profit - growthepie

4.5.3 Reduced Operating Costs

Taiko has made several technological advancements aimed at optimizing network performance and reducing costs. In particular, gas fees for TaikoL1 contracts have been reduced by 30%, enhancing proposers' profitability. Additionally, collateralization and the effectiveness of SGX proofs and dispute collateral have been reduced by 50%, lowering capital costs and enabling more participants to engage in permissionless transaction ordering on Taiko.

5. Now is the Time to Focus on Taiko's Progress

Source: Taiko Mirror

It has been nine years since Ethereum first made its global debut. During this time, Ethereum has experienced tremendous growth and undergone many transformations to address the challenges encountered in its scaling process. Among these, Layer 2 solutions have become a key choice for addressing Ethereum's scalability issues, ushering in the current era dominated by Ethereum L2. However, over time, some solutions have deviated from the original Ethereum L2 vision, leading to increased competition or opposition to Ethereum, thereby weakening Ethereum's security.

The key now is to focus on identifying "true L2 solutions that align with the Ethereum vision" – those with the potential to become true partners of Ethereum rather than threats. This means carefully discerning which entities are truly focused on addressing Ethereum's scalability challenges and taking appropriate steps in this regard. Based on this, Taiko has garnered widespread attention. Taiko is striving to become an L2 that is on par with Ethereum, fully decentralized, and developer-centric. It is worth noting that Taiko has invested significant effort in achieving these goals and has received strong technical support from entities such as BCR and BBR.

Of course, many other Ethereum L2 projects are also working in their own ways, so in this Ethereum L2-dominated era, it remains uncertain which project will ultimately prevail. However, Taiko is attracting attention because it is steadily translating its clear direction, namely addressing Ethereum's fundamental challenges, into tangible results.

Disclaimer

This article was co-authored in collaboration with Taiko Labs and is for general informational purposes only, and does not constitute legal, business, investment, or tax advice. It should not be the basis for any investment decision, nor should it rely on accounting, legal, or tax guidance. References to specific assets or securities are for illustrative purposes only and do not constitute a recommendation or endorsement. The views expressed in this article are the personal views of the author and do not necessarily reflect the views of any affiliated institutions, organizations, or individuals. The views expressed in this article may change without being updated.

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