Flare Network Introduces Proposal to Implement Protocol-Level MEV Capture and Reduce Inflation by 40%

In a bid to become one of the first layer-1 blockchains to capture maximal extractable value (MEV) at the protocol level, Flare has put forth a governance proposal. This move would redirect MEV revenue, which is currently dominated by a small group of specialized actors, into the protocol's token economics. MEV refers to the revenue generated by block builders through reordering, inserting, or censoring transactions within a block, resulting in a hidden tax on ordinary users.

According to external estimates, MEV revenues can reach tens of millions on networks like Arbitrum, over $500 million on Ethereum, and up to $1 billion on Solana. The proposed three-stage plan would channel this revenue into Flare's token economy. Initially, block building would be transferred from individual validators to a designated builder operated by the Flare Entity, with a fallback to the current model if the builder is unavailable. The second stage would involve moving block building into Flare Confidential Compute, making the process publicly auditable.

The final stage would merge the builder and proposer into a single entity, shifting existing validators to a verification role. Additionally, 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. Several changes would take effect immediately after approval, including a reduction in annual FLR inflation from 5% to 3%, with the hard cap cut to 3 billion tokens per year from 5 billion. The base gas fee would increase 20-fold, from 60 gwei to 1,200 gwei, resulting in an estimated annual FLR burn of 300 million at current transaction volumes.

This increase would still keep the cost of a standard Flare transaction to 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 and has developed the FAssets system, which has produced over 150 million FXRP, 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.