The biological reefs in this area began forming around 7,500 years ago, initially dominated by stony corals. Approximately 4,400 years ago, the reef-building community shifted. Coralline algae took over as the primary architects, likely because environmental conditions became unsuitable for coral growth. The transition produced something genuinely unusual: a reef system built predominantly by unsegmented, shell-like coralline algae rather than the familiar branching corals that dominate tropical waters. This makes the Taoyuan algal reefs not just locally significant but globally rare. They represent the largest living algal reef ecosystem dominated by shell-like coralline algae in Taiwan, and one of the few such formations found anywhere.

Taoyuan once possessed a continuous stretch of algal reef coastline. Industrial pollution and land reclamation have destroyed much of it. Only the southern portions remain in relatively healthy condition, divided into three sections running north to south: White Jade Algae Reef, Tai Tam Algae Reef, and Guanxin Algae Reef. The damage to the northern reefs was not gradual; it was industrial, systematic, and for decades largely ignored. By the time conservationists raised the alarm, much of what had taken millennia to build had been smothered or scraped away. The surviving reefs became the focus of an urgent campaign to protect what remained before development consumed the rest.

On July 7, 2014, the Taoyuan City Government designated approximately four kilometers of the Guanxin algae reefs as a wildlife refuge under the Wildlife Conservation Act. The decision did not satisfy everyone. Local civil society groups argued for a higher level of protection under the Cultural Assets Preservation Act, which would have designated the reefs as a natural reserve with stricter safeguards. Instead, the city government spent NT$9.2 million commissioning the Taiwan Wetland Society to study the area. The recommendation was for zoning management and what officials termed "wise use." The core area now prohibits any alteration of the natural state. Entry requires permission, and the buffer zone limits daily visitors to 200 people. It is a compromise that conservation advocates accept grudgingly, knowing that any protection is better than the alternative.

Like coral reefs, algal reefs serve as habitats for a rich variety of marine organisms. Researchers from the Center for Biological Diversity at Academia Sinica have used underwater soundscape recordings to study the reefs, discovering a surprising abundance of crustacean sounds beneath the waves. In 2017, surveys of the Tai Tam Algae Reef revealed suspected new species of shell-like coralline algae and the first recorded sighting of the Chai Shan Polyporus, a protected species, suggesting the reef's biodiversity has been significantly underestimated. The overall ecological functions and biodiversity of the surviving algal reef areas remain a subject of active research, with scientists cautioning that what has been documented so far likely represents only a fraction of what lives within these ancient structures.