An Ethereum fee has two components that behave in opposite ways. One is set by the protocol and destroyed; the other is chosen by the user and paid to whoever includes the transaction.
The base fee is calculated, not bid
Every transaction in a block pays the same base fee per unit of gas, and no user chooses it.
The protocol raises it when the previous block exceeded its target occupancy and lowers it when the block was under target, with the change limited per block.
This gives users something a pure auction does not: a predictable price for the next block, so a wallet can estimate a fee without guessing what others will bid.
Burning the base fee removes it from supply
The base fee is destroyed rather than paid to the block proposer, which permanently reduces the amount of ether in existence.
The reason is incentive alignment. A proposer who received the base fee could inflate it by filling blocks with transactions of their own and paying themselves.
Because it is burned, the proposer gains nothing from congestion beyond what users voluntarily offer, so the calculated price stays honest.
The tip is the part that is actually bid
The priority fee is chosen by the user and goes to the proposer. It is what buys ordering within a block rather than inclusion in one.
Under normal conditions a small tip suffices, because blocks are not full and proposers accept anything above their cost of inclusion.
When ordering carries real value, tips rise sharply while the base fee is still catching up, which is why the two components diverge during busy periods.
The maximum fee is a ceiling, not a payment
Users set a maximum they are willing to pay in total. The actual charge is the current base fee plus the tip, and the remainder is returned.
Setting a generous ceiling therefore costs nothing in a calm market and prevents a transaction from stalling if the base fee climbs while it waits.
What this means for reading fees
A high base fee indicates sustained demand for block space over recent blocks, since it takes several full blocks to move it far.
A high tip alongside an ordinary base fee indicates competition for position within a single block, which is a different situation and usually a much shorter one.