Back in April 2018, Vitalik proposed that there should be a hard cap on the total Ethereum supply, which ended up being an april fools joke.
However, to handle gas fees and high prices, there was a proposal that introduced a significant shift in the tokenomic design and efficiency of the Ethereum network: EIP-1559.
The Ethereum 1559 proposal is a significant upgrade to the Ethereum network that aims to improve the transaction fee mechanism and make Ethereum more deflationary. It introduces a new fee structure where a base fee is burned with each transaction, reducing the overall supply of Ethereum over time. This mechanism is designed to create a more predictable and efficient fee market, benefiting both users and miners. Additionally, the proposal includes changes to the block size and block gas limit to optimize the usage of network resources. Overall, Ethereum 1559 is expected to enhance the user experience, reduce transaction fees, and make Ethereum a more attractive investment asset by increasing its deflationary nature.
As a result, with a supply cap and a supply burn mechanism built into the design of the network, this meant that Ethereum was now a deflationary asset provided network activity is maintained at a level where the burn rate is higher than the supply.
To date (late 2023), there has been a total of 1,091,825 ETH burned and has significantly outpaced the supply increase of ETH, making it a deflationary asset!
An in-depth dive to the design of EIP-1559 can be found here by Consensys:
What is EIP-1559? How Will It Change Ethereum? | Consensys
For a visual representation on the burn, check out the Ultra Sound Money website: