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FLR Flare FIP.16 proposal comprehensively strengthens the token destruction mechanism and reduces inflation
As a well-known Layer 1 blockchain network, Flare has witnessed significant on-chain effects after the reconstruction of its token economics. The change came after the FIP.16 proposal received 98.06% support from Flare governance participants. According to DefiLlama, the proposal reduces the annual inflation rate of $FLR, increases transfer fees, and reveals new mechanisms to more strongly link token supply mechanisms to online activity. As a result, since the beginning of major changes, the amount of $FLR pledged has jumped significantly from nearly 16 billion to nearly 21.5 billion.
Flare's tokeneconomics refactoring has shown considerable impact, especially after the FIP.16 proposal received 98.06% governance support. At the same time, the amount of token destruction triggered by transfers surged more than 10 times compared with the benchmark level before the fork. These changes provide an early signal of whether the network can shift its economic framework from a revenue model that relies on inflation funding to a revenue model that relies on real agreement use. Specifically, FIP.16 was passed on April 24, incorporating a number of key changes that affect $FLR issuance, pledge weights, agreement revenue, token destruction and transfer fees.
The first major adjustment occurred on May 14, when annual inflation fell from a peak of 5% to just 3%. At the same time, the annual issuance limit has been reduced from 5 billion to nearly 3 billion $FLR. In addition, the strong inflation base has also shrunk. Specifically, this calculation excludes permanently destroyed $FLR tokens,$FLR controlled by the Flare Income Reinvestment Entity, and unearned rewards retained in various penalty pools. As these balances increase, it is reported that the supply applied to interest rates as high as 3% will become smaller, potentially reducing additional issuance.
Another major change occurred in the hard fork on July 14. With this upgrade, Flare has increased basic transfer fees by 20 times to enhance the network's automated $FLR destruction model. Despite the surge in fees, a simple transaction costs just $0.064 FLR, keeping the underlying cost relatively low. In addition, FIP.16 has also changed the distribution of economic influence in the network.
Token economics restructuring promotes the growth of $FLR pledges
As a result, the pledge of the P chain gets 5 times the weight of the C chain's delegated signature, making the $FLR token locked at the verifier have greater influence. Compared to liquid-backed tokens that are easy to withdraw, this development is designed to support capital committed to ecosystem security. The size of the largest verifier has soared from 200 million $FLRs to 300 million $FLRs, and a minimum commission fee of 20% for the entire network has been introduced.
According to DefiLlama data, the impact of Flare's economic restructuring includes an increase in the number of $FLR tokens pledged in July from 16 billion to 21.5 billion. At the same time, the proportion of $FLR tokens entrusted and pledged soared from 32% to 46% between April and August. In addition, FIRE is another key element of this restructuring, with its pool reducing the supply of $FLR through open market buybacks and destruction. Overall, Flare's FIP.16 marks a key shift in token economics, paving the way for building a relatively sustainable network as agreement revenue increases, destruction increases, and pledge increases.
