Flare’s tokenomics overhaul drives higher staking and 10x increase in FLR burns

Flare’s overhaul of its token economics is beginning to show measurable changes on the network, with the amount of FLR staked rising to 21.5 billion and the rate at which tokens are burned climbing more than tenfold from its pre-fork level.

The changes follow FIP.16, a proposal approved by Flare’s community on April 24 with 98.06% support. The overhaul reduced annual FLR inflation from 5% to 3%, increased transaction fees, and changed how staking contributes to the network’s security.

The goal of the proposal was to make FLR economics increasingly tied to usage of the Flare network instead of relying primarily on token issuance to incentivize network participants.

What changed under Flare’s tokenomics overhaul?

Flare reduced its annual inflation rate to 3% in May, and this was the first major change that took effect under the FIP.16 roadmap. Around the same period, it brought its maximum annual issuance from 5 billion FLR to 3 billion FLR.

Flare was able to raise its base transaction fee from 25 gwei to 500 gwei following a July 14 hard fork. The increase in fees increases the amount of FLR that gets destroyed through transactions, while the cost of a simple transfer remains small.

Flare’s FIP.16 proposal had projected that the higher fee could substantially increase annual burns while keeping transaction costs low compared with other major blockchains.

The overhaul also gave FLR staked on Flare’s P-chain five times the signing weight of delegated FLR on its C-chain, increasing the influence of tokens committed directly to network security.

How much FLR is now being staked and burned?

Flare said 21.5 billion FLR is now staked, up from about 16 billion in July. Staking’s share of all staked and delegated FLR also went up from about 32% in April to around 46% by late August.

The increase coincided with the implementation of FIP.16’s new staking incentives. The maximum validator size also rose from 200 million to 300 million FLR, while a 20% minimum delegation fee was introduced.

The network has burned 15.6 million FLR through transaction fees this year. More than 40% of that amount was burned after the July hard fork, taking the current burn rate to more than ten times its pre-fork baseline.

An independent FIP.16 tracker also records the July increase in the base gas fee and the new staking parameters.

How is network activity generating revenue for FLR?

Flare’s new Flare Income Reinvestment Entity, known as FIRE, is intended to collect revenue generated by network activity. This revenue will then be put to use towards FLR burns, open-market buybacks, and ecosystem incentives.

So far, FIRE has collected $31,438 according to Flare. FAssets minting fees contributed $18,248, while FDC request fees accounted for $12,676. Tag registrations and redemption fees made up the remainder of the revenue collected.

Flare is reportedly introducing other revenue sources to its stack, and they include fees from Flare Smart Accounts, Confidential Compute, and protocol-level MEV capture.

The changes give Flare a system in which transaction activity, data requests, and the use of its FAssets infrastructure can increasingly feed into the economics of FLR. The first results remain an early stage of that transition, with more components of the system still to come.

FLR is currently trading around $0.00676, having declined by over 3% in the past 24 hours, per CoinMarketCap data.