Understanding Payment Structures in Taiko’s Self-Sustaining Blockchain Network

Taiko, a self-sustaining blockchain network, has intricate payment structures in place to incentivize its participants. In a recent report by taiko.mirror.xyz, the network’s unique approach to rewarding users, block proposers, block provers, and validators is highlighted.

The life cycle of a transaction on Taiko involves a complex process that starts on layer 1 (L1) of the Ethereum blockchain and moves to layer 2 (L2) for further processing. Unlike traditional blockchain networks, Taiko does not burn congestion fees but directs them to the Taiko treasury, ensuring a sustainable financial model.

Four main participants drive the Taiko network: users, L2 block proposers, block provers, and L1 validators. Each participant plays a crucial role in the network and receives rewards or pays fees based on their contributions.

Users initiate transactions on Taiko by paying a fixed L2 transaction fee, while L2 block proposers bundle transactions into blocks and submit them to L1, receiving priority fees as rewards. Block provers generate validity proofs and receive a portion of the fees, covering hardware costs. L1 validators order Taiko blocks on L1 independently and receive tips from L2 proposers.

Moreover, a portion of each transaction fee on Taiko is directed to the Taiko DAO treasury, allowing for funds to be used for monetary policy and risk management. The percentage allocated to the DAO varies based on EIP-1559 and the current congestion level on L2.

With its innovative payment structures and focus on sustainability, Taiko is paving the way for a new era of blockchain networks.