In a groundbreaking move, Flare has unveiled a governance proposal that would enable the network to capture maximal extractable value (MEV) at the protocol level, a first for a layer-1 blockchain. This approach would redirect MEV revenue, currently dominated by a select group of specialized actors, back into the protocol's token economics. MEV refers to the revenue generated by block builders through the reordering, insertion, or censorship of transactions within a block, effectively imposing a hidden tax on users through front-running, sandwich attacks, and arbitrage. Estimates suggest that MEV revenues can reach tens of millions of dollars on networks like Arbitrum, over $500 million on Ethereum, and up to $1 billion on Solana.
Flare's proposal outlines a three-stage process to integrate MEV capture into its protocol. Initially, block building would be transferred from individual validators to a designated builder operated by the Flare Entity, with a fallback to the current model if the builder becomes unavailable. The second stage would move block building into Flare Confidential Compute, making the process publicly auditable. The final stage would merge the builder and proposer into a single entity, transitioning existing validators to a verification role.
The proposal also introduces FIRE, the Flare Income Reinvestment Entity, tasked with collecting revenue from various protocol sources, including attestation fees, FAsset and Smart Account fees, confidential compute fees, and captured MEV. FIRE's primary objective is to reduce the FLR token supply through open-market buybacks and burns.
Upon approval, several changes would take effect immediately. Annual FLR inflation would decrease from 5% to 3%, with the hard cap reduced to 3 billion tokens per year from 5 billion. A significant increase to the base gas fee, from 60 gwei to 1,200 gwei, would raise the estimated annual FLR burn from approximately 7.5 million to 300 million at current transaction volumes.
Notably, even with this increase, a standard Flare transaction would remain extremely cost-effective, fractions of a cent. Flare's connection to the XRP ecosystem is rooted in its initial token supply distribution through an airdrop to XRP holders in 2023. The network's FAssets system has successfully produced over 150 million FXRP, aiming to bring smart contract functionality to assets on blockchains like XRPL that do not natively support it. As of late March 2026, the network boasts over $160 million in total value locked, with more than 887,000 active addresses, underscoring its growing presence in the cryptocurrency landscape.