In a bid to revolutionize its token economics, Flare has unveiled 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 redirect MEV from a select group of profiteers to the protocol itself, thereby creating a more equitable ecosystem.
MEV refers to the revenue generated by block builders through the strategic reordering, insertion, or censorship of transactions within a block. Currently, this value is largely exploited by external searchers and builders, resulting in a hidden tax on ordinary users through practices like front-running, sandwich attacks, and arbitrage. Estimates suggest that MEV revenues can be substantial, with tens of millions of dollars on networks like Arbitrum, upwards of $500 million on Ethereum, and potentially as high as $1 billion on Solana. Flare's proposal is structured into three stages, with the primary goal of integrating MEV revenue into the protocol's token economics.
Initially, block building would be transitioned from individual validators to a designated entity operated by the Flare Entity, with a provision to revert to the current model if the builder becomes unavailable. The second stage involves moving block building into Flare Confidential Compute, making the process transparent and publicly auditable. The final stage would merge the builder and proposer roles into a single entity, reassigning existing validators to a verification capacity. Additionally, the proposal introduces FIRE (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.
The primary objective of FIRE is to reduce the FLR token supply through strategic buybacks and burns on the open market. Upon approval, several changes would be implemented immediately.
The annual FLR inflation rate would decrease from 5% to 3%, with the hard cap reduced from 5 billion to 3 billion tokens per year. Furthermore, a significant 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, based on current transaction volumes. Notably, even with this increase, the cost of a standard Flare transaction would remain a fraction of a cent.
Given Flare's origins in the XRP ecosystem, having conducted an airdrop to XRP holders in 2023, its FAssets system has been successful in bringing smart contract functionality to assets on non-native blockchains like XRPL, resulting in the creation of over 150 million FXRP. As of late March 2026, the network boasts over $160 million in total value locked, with more than 887,000 active addresses, underscoring its growing presence in the cryptocurrency landscape.