Flare Network has unveiled a sweeping governance proposal, FIP.16, aimed at capturing maximal extractable value (MEV) at the protocol level while significantly tightening the tokenomics of FLR.
Summary
Flare’s FIP.16 proposes protocol-level MEV capture, redirecting value back into the ecosystem.
The plan cuts annual FLR inflation from 5% to 3% and boosts token burns through higher gas fees.
A new entity, FIRE, will manage revenues and execute buybacks and burns.
Flare targets protocol-owned MEV
Under the proposed FIP.16 framework, Flare aims to internalize MEV—value typically captured by external searchers and bots—and redirect it into the network’s economy. The goal is to directly link network activity to token value through buybacks and burns.
The redesign introduces a three-phase shift in block production. Initially, block building would move from individual validators to a designated builder controlled by the network. This would later transition into a more transparent system using confidential compute, before eventually merging builder and proposer roles, leaving validators primarily responsible for verification.
Inflation cut and token burn strategy
A key pillar of the proposal is a sharp reduction in inflation. If approved, FLR’s annual inflation rate would drop from 5% to 3%, with the issuance cap reduced from 5 billion to 3 billion tokens—effectively a 40% cut.
In parallel, Flare plans to significantly increase its base gas fee from 60 gwei to 1,200 gwei. Despite the increase, transaction costs are expected to remain minimal, while dramatically boosting token burn rates—from an estimated 7.5 million FLR annually to roughly 300 million tokens at current usage levels.
FIRE to drive buybacks and value accrual
The proposal also introduces the Flare Income Reinvestment Entity (FIRE), a new mechanism designed to collect and redistribute protocol revenues.
FIRE will aggregate income from multiple sources, including transaction fees, FAsset activity, smart accounts, confidential compute, and captured MEV. These funds will then be used to buy back FLR tokens from the open market and burn them, reinforcing long-term value.
Flare argues that MEV represents a “hidden tax” on users and that reclaiming it at the protocol level ensures fairer value distribution across the ecosystem.
Growing ecosystem and XRP connection
The proposal comes as Flare reports over $160 million in total value locked and a growing user base exceeding 880,000 active addresses. The network also maintains strong ties to the XRP ecosystem through its FXRP bridge, with around 150 million FXRP minted to enable smart contract functionality.
FLR tokens were initially distributed to XRP holders in 2023, further linking the two ecosystems.
Broader implications
Flare’s move reflects a wider industry debate seen across networks like Ethereum over whether MEV should remain in the hands of specialized actors or be captured and redistributed at the protocol level.
With FIP.16, Flare is positioning itself at the forefront of this shift—placing the decision squarely in the hands of its community as the proposal heads toward a governance vote.
