In a bid to revolutionize its token economics, Flare has put forward 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 revenue, currently profited by a limited number of specialized actors, back into the protocol. MEV refers to the income that block builders generate by manipulating transaction orders within blocks, essentially 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 certain networks, with Ethereum reportedly generating upwards of $500 million and Solana potentially reaching $1 billion. Flare's proposal is designed to channel this revenue into its token economics through a three-stage process. Initially, block building would transition from individual validators to a designated builder operated by the Flare Entity, with a fallback mechanism in place.
The second stage would integrate block building into Flare Confidential Compute, enhancing transparency. The final stage would merge the builder and proposer roles, reassigning validators to verification duties.
A new entity, FIRE (Flare Income Reinvestment Entity), would be established to collect revenue from various protocol sources, including fees from attestation, FAsset, Smart Accounts, confidential compute, and captured MEV. FIRE's primary objective is to reduce the FLR token supply through strategic buybacks and burns. Upon approval, several key changes would be implemented immediately. The annual FLR inflation rate would decrease from 5% to 3%, and the hard cap would be 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 significantly 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.
With its roots deeply embedded in the XRP ecosystem, Flare has previously distributed its initial token supply via an airdrop to XRP holders and has developed the FAssets system, which enables smart contract functionality for assets on non-native blockchains like XRPL, producing 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.