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How the DAO works

DAO Structure and Operation

Taiko DAO operates as a decentralized autonomous organization with multiple layers of governance:

  • Token Holders:

    • Anyone holding L1 Taiko Token is a Token Holder and can participate in the DAO.
      • Token holdings are tracked on Ethereum mainnet, and snapshots of these holdings are taken at proposal creation time to determine veto rates.
    • Can exercise their own voting rights or delegate them to another participant
    • Can veto Standard Proposals during the 21-day vetoing period
    • Proposals pass if the veto rate is under 10% after the vetoing period

  • Security Council:

    • Specialized governance body responsible for protocol security and day-to-day operational decisions
    • Can create and approve both Standard and Emergency Proposals
    • Members may appoint Agents to act on their behalf

The governance structure is designed to balance decentralization with the need for swift, expert decision-making on security matters. This page will cover more details about the functions each of the aforementioned groups play in the operation of the Taiko DAO.

Token Holders

The Token Holders are the backbone of Taiko’s decentralized governance system. Every holder of the L1 Taiko Token belongs to this group, and they have the power to influence protocol decisions through voting and delegation.

Their primary function is fairly self-explanatory: they possess the power to veto any Standard Proposal brought forth by the Security Council if they believe it is not in the interest of the protocol or its users.

Token Holders are also able to delegate their voting rights to another address. The delegation is recorded on-chain and can be changed at any time, but only affect future proposals due to the snapshot mechanism used for veto rate calculations. Delegates are expected to represent the delegators’ interests and participate actively in governance.

The Security Council

The Security Council occupies a privileged position within Taiko’s governance framework. It is a group composed of a select few members who are entrusted with overseeing the protocol’s security and operational integrity.

The Security Council has exclusive authority over day-to-day operational decisions: this is manifested in their ability to create and approve Standard and Emergency Proposals. This authority is granted based on members’ expertise and the need for timely decisions.

Voting Mechanisms

The governance process follows different paths depending on the proposal type. These proposals must also adhere to specific guidelines.

Emergency Proposals (Security Council Only)

  • Any Security Council member can create an encrypted Emergency Proposal
  • The proposal requires approval from at least 6 members of the Security Council members
  • No token holder approval is required, so token holders cannot block urgent security measures
  • Implementation may be executed by any Security Council member as soon as the approval requirements are satisfied.
  • Emergency Proposal mechanism is limited to specific security concerns

Standard Proposal Voting (Token Holders + Security Council)

  • Two-Phase Process: - Phase 1: Security Council approval (minimum 5 members) - Phase 2: 21-day public vetoing period
  • Vetoing Process: - Any eligible token holder can cast a veto vote - Veto power is proportional to token holdings - Veto rate calculated as: (Tokens Used for Veto / Total Eligible Tokens) × 100% - Proposal passes if veto rate is below 10% after 21 days
  • Execution Requirements: - After successful veto period, any Security Council member must execute the proposal - Security Council cannot bypass token holder veto rights for Standard Proposals - Execution must be timely to ensure proposal relevance - Executed proposals are implemented immediately

This governance structure represents Taiko’s commitment to balancing expert security oversight with decentralized community governance. The Security Council’s role is enhanced, not diminished, by the ultimate authority of Token Holders, as it allows the council to focus on its core security expertise while ensuring broad alignment with community interests.