Flare Network Overhauls Tokenomics with Lower Inflation, Higher Burn Rate

The Flare network has implemented a major overhaul of its tokenomics after its landmark governance proposal FIP.16 passed with 98.06% approval in May.

The changes aim to reduce inflation, increase burn rate, and create a new protocol revenue pool called FIRE (Flare Income Reinvestment Entity).

The annual issuance of FLR tokens has been cut from 5% to 3%, reducing the hard cap from 5 billion to 3 billion per year. The effective impact is further reduced as FIP.16 excludes permanently burned tokens, unearned rewards in penalty pools, and FLR held by FIRE from the inflation calculation.

The burn rate has increased significantly due to a 20x increase in base transaction fees from 25 gwei to 500 gwei. Over 40% of the 15.6 million FLR burned year-to-date has occurred since the July 14 hard fork, putting the current burn rate at more than ten times its pre-fork baseline.

The maximum validator size was also raised from 200 million to 300 million FLR, and staked FLR has climbed from roughly 16 billion to 21.5 billion since the hard fork.