In a groundbreaking move, Flare has introduced a governance proposal that would make it a pioneer among layer-1 blockchains in capturing maximal extractable value (MEV) at the protocol level. This approach would redirect MEV revenues, currently flowing to a select group of specialized actors, back into the protocol's ecosystem.
MEV refers to the income generated by block builders through the reordering, insertion, or censorship of transactions within a block, effectively imposing a hidden tax on ordinary users. Estimates suggest that MEV revenues 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 plan to integrate MEV into its token economics.
Initially, block building would be transferred from individual validators to a designated entity operated by the Flare Entity, with a fallback option to the current model if the builder becomes unavailable. The second stage involves shifting block building to Flare Confidential Compute, making the process publicly auditable. The final stage merges 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, 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 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. Despite this increase, the cost of a standard Flare transaction would remain a fraction of a cent. With its roots in the XRP ecosystem, Flare has distributed 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 do not natively support it. As of late March 2026, the network reports over $160 million in total value locked, with more than 887,000 active addresses.