In a bid to revolutionize its consensus mechanism, Flare has unveiled a governance proposal that positions it as a pioneer among layer-1 blockchains in capturing maximal extractable value (MEV) at the protocol level, thereby preventing its concentration among a select group of specialized actors. This move has the potential to significantly impact the blockchain's token economics and user experience. MEV refers to the revenue generated by block builders through the strategic reordering, insertion, or censorship of transactions within a block, effectively imposing a hidden tax on ordinary users through practices like front-running, sandwich attacks, and arbitrage. According to external estimates, MEV revenues can reach tens of millions of dollars on networks like Arbitrum, exceed $500 million on Ethereum, and approach $1 billion on Solana.
Flare's proposal outlines a three-stage process to redirect MEV revenue into its token economics. The first stage involves transitioning block building 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 integrates block building into Flare Confidential Compute, making the process publicly auditable. The final stage merges the builder and proposer into a single entity, reassigning existing validators to a verification role.
Furthermore, the proposal introduces FIRE (Flare Income Reinvestment Entity), tasked with collecting revenue from multiple 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 will take effect immediately. The annual FLR inflation rate will decrease to 3% from 5%, and the hard cap will be reduced to 3 billion tokens per year from 5 billion.
A 20-fold increase in the base gas fee, from 60 gwei to 1,200 gwei, is expected to raise the estimated annual FLR burn from approximately 7.5 million to 300 million at current transaction volumes. Notably, even with this increase, the cost of a standard Flare transaction will remain a fraction of a cent. With its roots deeply embedded in the XRP ecosystem, Flare has a history of innovation, including the distribution of its initial token supply through an airdrop to XRP holders in 2023. Its FAssets system has produced over 150 million FXRP, aiming to bring smart contract functionality to assets on blockchains like XRPL that lack native support.
As of late March 2026, the network boasts over $160 million in total value locked and more than 887,000 active addresses, underscoring its growing presence in the blockchain landscape.