In a groundbreaking move, Flare has put forth 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 away from a select group of specialized actors who currently benefit from transaction ordering on various major chains. MEV refers to the income generated by block builders through the reordering, insertion, or censorship of transactions within a block.
Typically, this value is absorbed by external searchers and builders, effectively imposing a hidden tax on regular users through front-running, sandwich attacks, and arbitrage. Estimates suggest that annual MEV revenues reach tens of millions on networks like Arbitrum, exceed $500 million on Ethereum, and potentially reach $1 billion on Solana. Flare's proposal outlines a three-stage plan to integrate MEV revenue into the network's token economics. The first stage involves transferring 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 relocates block building to Flare Confidential Compute, making the process publicly auditable. The third stage merges the builder and proposer into a single entity, transitioning 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 objective 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 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. Despite this increase, a standard Flare transaction will remain relatively inexpensive, costing only 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. The network's 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.