From activity to value accrual: Our plan for FLR

This proposal is designed to generate far stronger economic transmission between growing activity on the Flare Network and the FLR token. It cuts inflation from 5% to 3%, introduces protocol-level MEV capture, and routes a broader set of network revenues through FIRE toward supply reduction and further ecosystem growth.

More than 150 million FXRP is already in circulation, with roughly 85% deployed across DeFi. The objective is simple: turn network activity into an economic flywheel that compounds back into FLR.

The missing link between XRPFi activity and FLR economics

Making FAssets more usable and capital efficient reduced the role of FLR in the system and weakened the link between network activity and FLR economics.

Under the earlier design, FLR would have been locked up as collateral to support FAsset creation and operation. In return, it would have earned fees from minting and redemption.

The problem is that bridge activity at scale is usually low-frequency. Once assets are minted, they tend to stay in circulation, so minting and redemption volumes are small relative to the total size of the bridge. That means the fees earned on locked FLR would also have been small as a percentage return.

Inflation would still have been needed to secure the network. And FAsset bridge fees would not have been available to offset inflation, because they would have had to go to FLR collateral providers as compensation for locking up their capital.

There was a second problem. Requiring large amounts of FLR to be locked as collateral would have made the system less capital efficient and created drag on ecosystem growth. That would likely have limited activity across other Flare protocols, which in turn would have limited both the utility and the fee growth of the network.

In other words, the old linkage between FLR and FAssets existed, but it was narrow. It depended mainly on locking up large amounts of FLR to earn relatively small bridge fees, while still relying on inflation for network security.

This proposal is designed to create a stronger and more direct connection between FLR token economics and real ecosystem activity by reducing inflation, increasing burn, and capturing a broader set of network revenues. That includes revenues from Flare’s data protocols, FAssets, Flare Smart Accounts, Flare Confidential Compute, and MEV. The proposal also redirects more rewards toward P-Chain staking and introduces a minimum infrastructure provider revenue share to support network stability.

FLR economic flywheel

This proposal is designed around a simple idea: network growth should not just happen on Flare. It should compound back into FLR. Activity creates fees and protocol revenues. Those revenues can reduce supply, strengthen the network, and support further growth. Stronger network economics can then attract more trust, more liquidity, and more participation, which in turn drives more activity.

The flywheel starts with real activity

Across the industry, tokenomics follow a familiar pattern: distribute, dilute, and hope activity follows. So far FLR has followed a similar trajectory.

Now the underlying network has real activity and this means that we can put forward a true economic model.

Flare already has substantial and growing ecosystem activity. As of April 7, 2026, the network has over $160 million in TVL by DefiLlama standard definition, and about $400 million on a broader basis that also includes RWAs, staking, liquid staking and borrowing protocols. It has also recorded more than 880,000 active addresses and approximately 150 million FXRP minted, representing roughly $200 million worth of XRP brought into DeFi through Flare. Just as importantly, greater than 85% of that FXRP is deployed across lending, vaults, staking, yield trading, and other DeFi workflows. XRPFi on Flare is already functioning as a DeFi pipeline.

Activity is also broadening across the network. The Flare Data Connector processed more than 25,000 attestations even before the launch of FAssets. Since FAssets went live, payment attestations have generally been up to 5x higher than pre-FAssets levels, with spikes around events such as minting cap increases. Flare Smart Accounts generated an additional 10,000 attestations in its first two weeks. Network participation with FLR itself is also strong, with roughly 60% of circulating FLR delegated or staked to support consensus and oracle infrastructure.

Flare’s base of activity, which has continued to grow even during challenging broader market conditions, is what makes the timing of this proposal relevant. The headroom for growth is substantial as the wider market improves, more users become familiar with Flare, recognition grows that Flare has made XRP a productive asset, and additional assets and capabilities come onchain. The question is no longer whether the Flare ecosystem can be a place where economic activity takes place, because it already is. It is how the FLR token can capture the value that usage creates.

The near-term shift: lower inflation, higher burn

If the proposal passes, some changes would be fully reflected from the following month.

Inflation drops

Annual inflation would fall from 5% to 3%. The hard cap on yearly inflation would fall from 5 billion FLR to 3 billion FLR. Certain token pools, including the burn address and protocol incentive pool balances, would also be excluded from the inflation base calculation, further reducing the amount of inflation generated.

Usage carries more economic weight

All FLR used for transaction fees is already burned. The proposal increases the base gas fee 20-fold, from 60 gwei to 1200 gwei.

At current transaction levels, this would result in roughly 300 million FLR burned per year, compared with approximately 7.5 million over the past six months under the old fee structure.

With inflation reduced to 3% on an inflatable balance of 86 billion FLR, gross inflation would be approximately 2.58 billion FLR. After accounting for transaction fee burn, net inflation would fall to roughly 2.28 billion FLR, or about 2.66%.

Even after the increase, Flare transaction costs remain a fraction of a cent. The change is about increasing the economic weight of usage.

The structural shift: capturing value at the protocol level

The most important change in this proposal is not the inflation cut, nor the increased burn. It is the creation of a system designed to turn network activity into governed, recurring revenue for FLR economics.

More specifically, it introduces protocol-owned block building with a defined mandate to capture MEV and direct it towards reducing supply and furthering growth, which compounds the system’s ability to reduce supply over time.

If implemented, Flare would be among the first general-purpose Layer 1 networks to enshrine MEV capture at the protocol level, rather than leaving it to external actors.

MEV capture brings hidden value inside the system

Every chain with meaningful DeFi activity generates MEV, which is value created through transaction ordering, liquidations, arbitrage, and other block-building opportunities. On most chains, that value is captured privately by specialised actors. In practice, it behaves like a hidden tax on users and protocols that flows to a relatively small number of external entities.

This proposal introduces a different model. Instead of allowing MEV to be extracted externally, it creates a mechanism to internalise that value and route it back into the network.

To give a sense of scale, the proposal points to what MEV looks like on other chains today.

These are external estimates, and ranges vary by source. What they demonstrate is that, once a network reaches meaningful economic activity, MEV can become one of the largest sources of value generation within the system.

MEV available on Flare will depend on the volume and composition of DeFi activity on the network. Flare’s ecosystem today is smaller than those referenced above. Even so, the opportunity is already real. In Q1 2026 alone, Flare’s DeFi activity included more than 660,000 transactions involving cyclic arbitrage structures and more than 1,000 liquidation events, both core areas where MEV opportunities exist.This proposal establishes the structure required to capture the MEV the ecosystem produces and direct it towards FLR token economics rather than external searchers.

The structure is designed as a virtuous circle; captured value is fed back to FLR token economics, DeFi protocols and asset issuers, encouraging further growth and leading to further value capture.

The implementation follows a staged roadmap:

Stage 1 is the point at which protocol-level MEV capture begins. It moves block building to a designated builder, initially FEL, with a fallback to the current model if the builder is unavailable. Block building shifts from individual validators to a designated entity whose output is verifiable and whose proceeds flow to the protocol. The core systems needed for initial MEV capture — cyclic arbitrage and liquidation execution — are already built, with rollout subject to the final implementation schedule. From that point, captured proceeds begin accruing to the protocol rather than flowing primarily to external actors.

Early MEV revenue is expected to start gradually, and initial amounts are likely to be modest, with most near-term FIRE revenue coming from other sources such as FAssets and Flare Smart Accounts. Stage 1 matters because it makes protocol-level MEV capture real, public and measurable from the start, rather than leaving it as a long-term aspiration.
Stage 2 moves block building inside Flare Confidential Compute, making the process transparent and auditable. The block building algorithm becomes publicly reviewable, constantly audited, and verifiably compliant with the network's MEV mandate, preventing censorship and malicious extraction.
Stage 3 merges the builder and proposer into a single designated entity. Validator nodes shift from producing blocks to verifying their correctness. Staked and delegated FLR continues to provide vote power and security across all core protocols. That role does not change.

The designated builder would be mandated to engage only in network-positive forms of MEV: lending protocol liquidations, atomic and cross-chain arbitrage, just-in-time liquidity provisioning, and post-trade arbitrage on Flare trading venues. Any changes to which types of MEV capture are permitted would require a vote with the FTSO management group.

The core idea is simple. MEV already exists on any chain with DeFi activity. This proposal creates a structure to return more of it to the network rather than letting it flow to external actors.

FIRE governs how network revenue is used

The proposal creates FIRE, the Flare Income Reinvestment Entity, as the umbrella framework governing how protocol revenues are allocated under this proposal and future revenue sources.

FIRE's primary mandate is to reduce the supply of FLR to the maximum extent possible.Its secondary mandates are to encourage economic activity on the network in order to generate expanded revenues and to provide long-term support for the Flare Foundation's work on security, engineering, application development, and ecosystem growth.

To be direct, FIRE is designed as a supply-reduction-first revenue pool with secondary growth mandates. Those secondary mandates, including rewarding asset issuers, supporting dapp liquidity, and funding Foundation operations, draw from the same pool of funds as buyback and burn. That tension is acknowledged in the design. The governance structure exists so the community can enforce accountability if spending unreasonably drifts from the primary mandate.
If the community finds at the end of any year that FIRE's actions are not serving its interests, a vote can be held to move FIRE to a joint governance structure. That vote requires at least 50% of the total inflatable supply voting in favour, a deliberately high bar designed to prevent capture by small groups of large holders while ensuring the broader community retains real power. FIRE would initially be administered by the Flare Foundation, with a committee assembled over time. The community override is a safeguard, not an operating model.

The revenue pool governed through FIRE draws from multiple sources, each tied to different types of ecosystem activity:

Flare Data Connector attestation fees. The proposal increases base fees for most attestation types from 1 FLR to 20 FLR, with 90% of collected fees flowing to the protocol incentive pool and 10% continuing through the existing rewards path. Even with this split, the absolute amount reaching infrastructure providers and their stakers would be higher than before at current volumes.
FAssets and Flare Smart Account protocol fees. Minting fees and a portion of redemption fees would be redirected to the protocol incentive pool.
FCC fees. Flare Confidential Compute deployment, maintenance, setup and attestation fees would contribute to the same protocol revenue loop, with a portion distributed directly to entities and stakers and the remainder diverted to the Protocol Incentive Pool under the FIRE framework.
MEV capture. As described above, the scale of this source depends entirely on the volume and nature of DeFi activity on Flare.

Funds accruing to FIRE would be held in a mix of FLR and other assets such as stablecoins, FAssets, and wrapped ETH. FIRE would determine whether those funds are reallocated directly or converted to FLR depending on asset liquidity, amount, and the best path to fulfilling the supply reduction mandate.

Importantly, redirecting revenue from FAssets minting fees, Flare Data Connector attestation fees, and Flare Smart Account fees is comparatively straightforward to implement and is expected to begin shortly after the proposal takes effect.

The initial allocation priorities for FIRE's funds are:

Buy FLR on the open market to be burned or used for other purposes within the mandate
Provide rewards to FLR validators and stakers, in place of, not in addition to, inflation-based rewards, working to push inflation below the 3% rate established by this proposal
Reward asset issuers in proportion to the activity and MEV earned on their issued assets
Increase yield or liquidity through dApps to support expanded economic activity
Support Foundation sustainability in development, security, and ecosystem growth

Summary

Flare is building infrastructure that matters: high-integrity data, interoperable rails for siloed capital, and verifiable compute for a more onchain asset economy. This tokenomics restructuring is about making FLR better reflect that reality. Network growth should not just happen on Flare. It should compound back into Flare. That is the logic behind the economic flywheel: activity creates earnings; earnings reduce supply, strengthen the network, and support further growth; stronger network economics attract more trust, more liquidity, and more participation. FXRP has already proven that Flare can build real rails and bring capital into live DeFi use. The next step is making sure the value created by that activity becomes more impactful on FLR itself.

The governance proposal radically relinks FLR token economics with both today's ecosystem usage and future growth. It immediately reduces FLR inflation to 3% and lowers the annual issuance cap to 3 billion FLR. As total supply rises beyond 100 billion FLR, that cap causes the effective inflation rate to decline further year by year.

The proposal also increases transaction fees while keeping them extremely low in USD terms relative to other networks, allowing more FLR to be burned as activity grows and reducing net token inflation immediately, with further reductions as ecosystem activity expands.

It establishes FIRE, an entity that accrues network revenues in multiple assets, including FAssets, FLR, stablecoins, WETH and others, from Flare’s data protocols, FAssets protocols, Flare Smart Accounts, Flare Confidential Compute, and most importantly, harnessing MEV and redirecting it to the benefit of the ecosystem. FIRE’s primary mandate is to use these revenues to neutralise inflation and reduce FLR token supply to the maximum extent possible, with secondary mandates to support further ecosystem expansion by directly supporting dApps and asset issuers and funding the ongoing work of the Flare Foundation.

At the same time, the proposal strengthens network security by shifting a greater proportion of inflation to P-Chain staking, encouraging more FLR to be locked rather than remaining immediately accessible to the market. It also supports infrastructure providers and their stakers and delegators by imposing a minimum 20% revenue share for the infrastructure provider, helping prevent excessive fee competition that could harm long-term network stability.

Taken together, the objective is simple: make FLR a clearer expression of the value created by the network it secures.

Get ready to vote

Bootstrapping got Flare here. This proposal is designed to move FLR beyond that phase, from a token secured mainly by emissions to a system where usage generates revenue, revenue offsets inflation, and supply reduction is tied to real activity.

The proposal describes the system and the conditions under which it works. What the ecosystem builds next determines the outcome.

Read the full governance proposal: https://proposals.flare.network/FIP/FIP_16.html

Notice period: 9-April-2026 to 16-April-2026

Voting period: 17-April-2026 to 24-April-2026