In a groundbreaking move, Flare has unveiled a governance proposal aimed at capturing maximal extractable value (MEV) at the protocol level, a first for a layer-1 blockchain. This approach would redirect MEV revenue, currently dominated by a select group of specialized actors, back into the protocol's token economy. MEV refers to the income generated by block builders through the strategic reordering, insertion, or censorship of transactions within a block, effectively imposing a hidden tax on users through practices like front-running and arbitrage. Estimates suggest that MEV revenues reach tens of millions of dollars on networks like Arbitrum, upwards of $500 million on Ethereum, and potentially $1 billion on Solana.
Flare's proposal is designed to integrate this revenue stream into its token economics through a three-stage process. Initially, block building would be transferred from individual validators to a designated entity, with a fallback mechanism in place. The second stage would involve moving block building into Flare Confidential Compute, enhancing transparency.
The final stage would merge the builder and proposer roles, transitioning validators to a verification capacity. A key component of the proposal is the establishment of the Flare Income Reinvestment Entity (FIRE), tasked with collecting revenues from various protocol sources, including fees from attestation, FAsset and Smart Accounts, confidential compute, and captured MEV.
FIRE's primary objective is to decrease the FLR token supply through strategic buybacks and burns on the open market. Upon approval, several changes would be implemented immediately. The annual inflation rate of FLR tokens would decrease from 5% to 3%, with the hard cap reduced from 5 billion to 3 billion tokens per year. Additionally, the base gas fee would increase 20-fold, from 60 gwei to 1,200 gwei, which 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. Flare's roots in the XRP ecosystem are significant, having conducted an airdrop to XRP holders in 2023 for its initial token distribution.
Its FAssets system has been instrumental in bringing smart contract functionality to assets on blockchains that lack native support, such as XRPL, and has produced over 150 million FXRP. As of late March 2026, the network boasts over $160 million in total value locked and more than 887,000 active addresses, underscoring its growing presence in the cryptocurrency landscape.