In a recent governance proposal, Flare has outlined a plan to become one of the first layer-1 blockchains to capture maximal extractable value (MEV) at the protocol level, rather than allowing it to benefit a select group of specialized actors. This move would significantly impact the blockchain's token economics.
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 captured by external searchers and builders, who impose a hidden tax on users through front-running, sandwich attacks, and arbitrage. Estimates suggest that annual 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 involves a three-stage process to redirect MEV revenue into the protocol's token economics.
The first stage involves transferring block building from individual validators to a designated builder, initially operated by the Flare Entity, with a fallback to the current model if the builder becomes unavailable. The second stage moves block building to Flare Confidential Compute, making the process publicly auditable. The final stage combines the builder and proposer into a single entity, shifting the role of existing validators to verification.
The proposal also introduces the Flare Income Reinvestment Entity (FIRE), 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 reduce 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%, 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 will remain 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 generated over 150 million FXRP and is designed 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.