In a bid to revolutionize its token economics, Flare has put forth a governance proposal that would make it a pioneer among layer-1 blockchains in capturing maximal extractable value (MEV) at the protocol level. This move would redirect MEV revenue from a select group of specialized actors to the protocol itself. MEV refers to the income generated by block builders through the reordering, insertion, or censorship of transactions within a block.
Currently, this value is largely captured by external searchers and builders, who impose a hidden tax on regular users through front-running, sandwich attacks, and arbitrage. Estimates suggest that annual 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 is structured into three stages, with the primary objective of channeling MEV revenue into the protocol's token economics. The first stage involves transferring block building responsibilities from individual validators to a designated builder operated by the Flare Entity, with a fallback mechanism in place.
The second stage transitions block building to Flare Confidential Compute, making the process publicly auditable. The third and final stage merges the builder and proposer into a single entity, reassigning existing validators to a verification role. Additionally, the proposal introduces FIRE, the Flare Income Reinvestment Entity, which will collect revenue from various protocol sources, including attestation fees, FAsset and Smart Account fees, confidential compute fees, and captured MEV.
FIRE's primary function is to decrease 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 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, is expected to raise the estimated annual FLR burn from approximately 7.5 million to 300 million at current transaction volumes. Notably, even with the increased gas fee, a standard Flare transaction will still cost only a fraction of a cent.
Flare has strong ties to the XRP ecosystem, having distributed its initial token supply through an airdrop to XRP holders in 2023. Its FAssets system has successfully produced over 150 million FXRP, enabling smart contract functionality for 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.