In a move to revolutionize its token economics, Flare has put forth a governance proposal that would enable the capture of maximal extractable value (MEV) at the protocol level, rather than allowing it to accrue to a select group of specialized actors. This approach would make Flare one of the pioneering layer-1 blockchains to adopt such a strategy. MEV refers to the revenue generated by block builders through the reordering, insertion, or censorship of transactions within a block. Currently, this value is largely absorbed by external searchers and builders, who effectively impose a hidden tax on ordinary users through practices like front-running, sandwich attacks, and arbitrage.
Estimates suggest that MEV revenues can reach tens of millions of dollars on networks like Arbitrum, upwards of $500 million on Ethereum, and potentially $1 billion on Solana. Flare's proposal outlines a three-stage plan to redirect this revenue into the protocol's token economics. The first stage involves transitioning block building from individual validators to a designated builder operated by the Flare Entity, with a fallback mechanism in place.
The second stage would integrate block building into Flare Confidential Compute, making the process publicly auditable. The third stage would merge the builder and proposer into a single entity, reassigning existing validators to a verification role. Furthermore, the proposal introduces FIRE, the Flare Income Reinvestment Entity, which would collect 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. The annual FLR inflation rate would decrease from 5% to 3%, with the hard cap reduced from 5 billion to 3 billion tokens per year. A significant increase to 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 would remain a fraction of a cent.
Flare's roots in the XRP ecosystem are deep, having conducted an airdrop to XRP holders in 2023 to distribute its initial token supply. Its FAssets system has successfully 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 reports a total value locked of over $160 million, with more than 887,000 active addresses.