having the hp decrease by N doesn't feel right.
Why don't you like the Idea. It seems to me that the fire is getting exponentially intense till it doesn't have anything to feed on and dies.
Oh i missed that. You could change it to hand or field?
I don't like it so much. Too me it was more the fact that you couldn't keep the flames in your hand because you would burn yourself. The idea was to develop a 
/ 
synergy through nightmare.
Why do I not like N|c-N? Mechanically this is an obvious shortcut out of the fractal problem that does not need to happen. The main problem is that c-N is fairly complex and when possible keep it simple. Each additional Flame brings more fuel so I would not expect it to start to die out especially at the ETG level of abstraction.
If a fire is hot enough that the mere concept of it hurts your head then what do you think it will do when you create it?
It now seems like you are trying to have two cards in one. [N^2 damage and Burn the Hand]
This is typically discouraged because it disadvantages the superior idea.
However if you want to do both ideas I would strongly suggest Burn deal 1 damage per card in the hand or on the field. This would make it so that 2 flames on the field + 6 in there hand would deal 6+2x2=10 damage to them and 2 damage to you. It might still be powerful enough to cost 3
with this modification. The self inflicted damage will balance fractal for you.
