Base Fee Protocol refers to a mechanism designed to determine the minimum fee users must pay to have their transactions processed on a blockchain network. This concept helps to manage congestion and incentivizes miners or validators to include transactions in blocks. Under this protocol, the base fee adjusts dynamically based on network demand.

When more users submit transactions, the base fee increases. Conversely, if fewer transactions are being processed, the fee decreases. This approach helps to stabilize the network and provides a more predictable fee structure for users. The protocol is significant in reducing price volatility for transaction fees. It enables users to assess the right amount to pay for timely processing, while also ensuring that the network remains efficient and scalable.

In some implementations, a portion of the fees collected may be burned, further enhancing the scarcity of the underlying asset. Overall, the Base Fee Protocol aims to create a fair and efficient transaction fee system while promoting overall network health.