In a bid to revolutionize its protocol, Flare has unveiled a governance proposal that would enable it to capture maximal extractable value (MEV) at the protocol level, a move that would set it apart from other layer-1 blockchains. 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 revenue generated by block builders through the reordering, insertion, or censorship of transactions within a block, effectively imposing a hidden tax on users through front-running, sandwich attacks, and arbitrage. Estimates suggest that MEV revenues reach tens of millions of dollars on networks like Arbitrum, upwards of $500 million on Ethereum, and as high as $1 billion on Solana. Flare's proposal outlines a three-stage plan to integrate MEV revenue into its 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 becomes unavailable.
The second stage would involve transitioning block building to Flare Confidential Compute, making the process publicly auditable. The final stage would merge the builder and proposer into a single entity, reassigning existing validators to a verification role.
Furthermore, 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 decrease 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 result in an estimated annual FLR burn of 300 million, up from roughly 7.5 million, at 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 run deep, having distributed its initial token supply to XRP holders through an airdrop in 2023.
Its FAssets system has successfully 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 boasts over $160 million in total value locked, with more than 887,000 active addresses.