Flare Network Introduces Proposal to Capture Maximal Extractable Value and Reduce Inflation by 40%

On Thursday, Flare announced 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 prevent MEV from being exploited by a select few specialized actors who currently profit from transaction ordering on major chains. MEV refers to the revenue generated by block builders through reordering, inserting, or censoring transactions within a block, effectively imposing a hidden tax on 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.

The proposed three-stage plan would redirect MEV revenue into Flare's token economics. 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 move block building to Flare Confidential Compute, making the process publicly auditable. In the final stage, the builder and proposer would be merged 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. Upon approval, several changes would take effect immediately.

The annual FLR inflation rate would 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, would raise the estimated annual FLR burn from approximately 7.5 million to 300 million at current transaction volumes. Despite the increase, a standard Flare transaction would 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 produced over 150 million FXRP, aiming to bring smart contract functionality to assets on blockchains like XRPL that lack native support. As of late March 2026, the network reports over $160 million in total value locked, with more than 887,000 active addresses.