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

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 from external actors to the network's own token economics. 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. Estimates suggest that MEV revenues can reach tens of millions of dollars on networks like Arbitrum, $500 million on Ethereum, and up to $1 billion on Solana.

The proposed three-stage plan would transition block building from individual validators to a designated entity, initially managed by the Flare Entity, with a fallback to the current model if needed. The process would become publicly auditable through Flare Confidential Compute, and eventually, the builder and proposer would merge into a single entity, shifting validators to a verification role. A new entity, FIRE (Flare Income Reinvestment Entity), would be established to collect revenue from various protocol sources, including fees and captured MEV, and its primary objective would be to reduce the FLR token supply through open-market buybacks and burns. Upon approval, several changes would take effect immediately, including a reduction in annual FLR inflation from 5% to 3%, a hard cap decrease from 5 billion to 3 billion tokens per year, and a significant increase in the base gas fee.

This would result in a substantial rise in estimated annual FLR burn, from approximately 7.5 million to 300 million, at current transaction volumes. Notably, Flare has strong ties to the XRP ecosystem, having distributed its initial token supply to XRP holders in 2023, and its FAssets system has generated over 150 million FXRP, bringing smart contract functionality to assets on blockchains like XRPL. As of late March 2026, the network boasts over $160 million in total value locked and more than 887,000 active addresses.