The new base fee is also designed to adjust dynamically based on demand on the network. Under EIP-1559, the fee changes alongside block size, and will target a specific level of gas usage close to the gas limit. If gas usage falls under the target, the base fee decreases to encourage demand.
Traditionally, a user sends a gas fee to a miner for a transaction to be included in a block. That gas fee will now be sent to the network itself as a sort of ‘burn’ called base fee with only an optional tip paid to miners.
The upgrade was introduced so that users pay a fair fee, but there were expectations that the burning of fees would make ETH a deflationary currency. This is still not the case, since for every block mined, 2 ETH is rewarded to miners for helping to run the network. This adds up to a total of 12,700 ETH roughly every day.
Currently, this reportedly ends up reducing the amount of inflation by 36%, which still helps to slow down the increase of the circulating supply over time.