Among the three coexisting types of terraces found on the twofold surface of the d-Al-Cu-Co quasicrystal, nanodomains are essentially observed on the transition-metal rich ones, with a coherent interface boundary. Both clean surface and Ag growth analyses, demonstrate that nanodomain surfaces are structurally identical to one of the two other terraces, which contains 85 at. % Al. We provide evidence that the nanodomains are a manifestation of phason defects that extend downward toward the bulk, and state that nanodomains develop because the energetic cost of creating the phason is outweighed by the change in surface energy. Consequently, the formation of nanodomains involves more than just the surface layer, but is driven by surface energetics.