The Ethereum Foundation has cut about 20% of its workforce and cut its budget by about 40% as part of a broader reorganization. Meanwhile, the blockchain powering administrators is recording record levels of user activity and attracting deeper participation from major financial institutions.
On June 23, the nonprofit announced it had laid off 54 employees following a months-long review of its structure, spending and long-term commitments.
Ethereum co-founder Vitalik Buterin said of the move:
I have far too much respect for my EF colleagues to pretend that not much is lost. they are wonderful people. They are passionate engineers, some of whom have been working on the Ethereum protocol for nearly a decade. They brought a bright light to the Ethereum ecosystem with their code, words, human warmth, and actions.
This contraction reflects growing inequality across the Ethereum ecosystem. Data from Token Terminal showed that network traffic and throughput reached records in the first quarter of 2026, and tokenized assets continue to expand across blockchains.
However, blockchain fee income, total locked up, and trading activity have slumped, with ETH down more than 44% this year, trading around $1,670.
While the foundation said that layoffs were not the cause of ETH’s decline, it said the changes were aimed at creating an organization that could carry out its mission without being repeatedly disrupted by short-term market movements.
Ethereum growth has not yet lifted ETH
Ethereum entered 2026 with increased user, transaction, and institutional activity, but these gains have not yet translated into stronger financial results for the network or sustained demand for its native token.
According to data from blockchain analysis firm Token Terminal, the number of monthly active users reached 13.2 million in the first quarter, an increase of 53.5% from the previous three months and 85.9% from the same period last year. The number of transactions increased 38% sequentially to 204 million, and throughput increased to a record rate of 25.78 transactions per second.
However, this surge in activity caused Ethereum’s base layer revenue to decline.
Layer 1 transaction fees decreased nearly 48% from the previous quarter and 81.9% year over year to $39.9 million. The total amount locked across the ecosystem decreased by 11% to $316.2 billion, and Ethereum’s fully diluted market value shrank by 30.3% to $290 billion at the end of the quarter.
Meanwhile, the same disconnect can be seen in Ethereum’s growing role in traditional finance.
According to Token Terminal, total tokenized assets on the network in the first quarter were $203.4 billion, including $178.9 billion in stablecoins. Tokenized funds grew 4.9% quarter-over-quarter and 73.1% year-over-year to $19.4 billion.
Tokenized products increased 60% sequentially to $4.7 billion, and tokenized equities increased 16.5% to $365.1 million.
This expansion is supported by financial institutions such as BlackRock, JP Morgan, Franklin Templeton, and Fidelity, which have developed tokenized funds using Ethereum and expanded other blockchain-based services.
Joseph Chalom, CEO of Ethereum financial firm Sharplink, said the network’s status relies on developers, infrastructure, standards, liquidity and applications accumulated over a decade.
He pointed out:
“Ethereum has become the default operating system for programmable finance and internet-native capital formation.”
However, Wall Street’s willingness to build on top of Ethereum has not created an equivalent demand for ETH.
The U.S.-listed Spot Ether ETF has posted seven consecutive weeks of total outflows of nearly $1 billion, suggesting weak investor demand for direct exposure to the asset.
Financial companies can issue tokenized funds, move stablecoins, and use Ethereum as a payment network without accumulating ETH in proportion to their activities. However, you may only need enough tokens to pay transaction costs. Transaction costs are decreasing as networks become more efficient.
As such, Ethereum’s institutional adoption and ETH’s market performance will follow separate trajectories.
While asset managers have expanded their use of the network’s infrastructure, the corresponding buying pressure has not been enough to lift the token, leaving it exposed to broader market weakness and competition from other digital assets.
Ethereum Foundation reorganizes around core defenses
To overcome this situation, the Ethereum Foundation has completed an internal reorganization and moved its structural framework from general ecosystem promotion to a highly specialized cluster model.
The rest of the organization’s personnel is divided into five functional departments spanning the protocol, access, user, community, and organizational tiers.
The rebuilt protocol cluster doubles down on core engineering priorities, specifically scaling, enhancing the user experience, and strengthening layer 1 encryption guarantees.
Additionally, this policy change indicates that the Foundation plans to move its internal rewards and financial arrangements directly to ETH and its native stablecoin.
Bastien Aue, Interim Co-Executive Director of the Ethereum Foundation, said the decision will force staff to operate fully within the practical parameters and technical limitations of the ecosystem. He added:
“If EF’s job is to make Ethereum available as a self-sovereign infrastructure, then everyone at EF will increasingly live within the constraints of the system that EF exists to improve: wallet UX, volatility, accounting, privacy gaps, payment frictions, stablecoin trust assumptions, recovery, dependency risk, etc. If we can’t use these tools ourselves, it’s unrealistic to expect others to.”
This institutional restructuring also signals ideological hardening.
Aue said the foundation rejects requests to adjust protocol parameters to meet short-term speculative interests or corporate appeals. Instead, development priorities will lean toward defensive software engineering designed to protect the ledger from organizational capture and centralization.
He said:
“we teeth It is here to provide a defensive fortification in places where Ethereum is or may become vulnerable to cartel or state capture, or tools of authoritarian surveillance and enforcement. ”
MEV and privacy are on the Foundation’s agenda
One of the Foundation’s main technological priorities is to reduce the risks posed by Maximum Extractable Value (MEV).
MEV refers to the profits that validators, block builders, and other market participants can extract by controlling how transactions are ordered, included, or excluded. Some forms arise naturally from arbitrage, but opaque routing and concentrated transaction flows can give a small number of operators disproportionate influence over the network.
Aue argues that while Ethereum could theoretically remain permissionless, it could become highly mediated at the point where users move value.
Proposed countermeasures include strengthening transaction inclusion guarantees, lowering barriers to block construction and validation, and increasing transparency regarding the assumptions users make when routing transactions.
Forward inclusion lists, known as FOCIL, are intended to make it harder for builders to censor transactions by allowing validators to request that future blocks include selected transactions.
Providing proposer-builder separation (ePBS) builds the relationship between validators and specialized block builders into the protocol, reducing dependence on external relays. While this design does not eliminate concentration risk, it may remove some trusted components from the current supply chain.
Researchers are also studying encrypted memory pools. This can hide details of pending transactions before execution, making front-running more difficult.
Such systems may pose new technical and competitive risks, including the benefits of specialized operators, and foundations will need to weigh further complexity against privacy and fairness.
Privacy will also become a parallel priority. The Foundation wants users to have access to strong privacy protections before information is selectively disclosed for identity, audit, or compliance purposes.
This approach may conflict with the preferences of institutions and regulators who seek greater visibility of blockchain transactions. The Foundation’s position is that Ethereum should support programmable disclosure without making continuous monitoring the network default.
A period of tight spending due to personnel cuts begins.
The layoffs also begin a more rigorous approach to the Foundation’s finances and external funding.
Ethereum co-founder Vitalik Buterin said the foundation will cut its budget by about 40% this year as it begins a multi-year transition to a smaller, endowment-based organization.
The cuts follow a financial policy adopted last year that aims for the foundation to stop spending about 15% of its remaining assets annually (the average before 2026) and move to a rate of about 5% annually after 2030.
The goal is to save Sufficient capital to support Ethereum development in the long term and reduce your organization’s exposure to cryptocurrency market cycles.
Buterin said the foundation is making these reductions as it moves forward with the third major iteration of Ethereum. That program, known as Ethereum Strawmap, aims to restructure key parts of the blockchain, including consensus, proof of transactions, privacy, user accounts, and how network state is managed.
In order to run this third iteration of Ethereum on a limited budget, the Foundation is scaling back several traditional efforts.
While the network’s long-standing multi-client model has traditionally relied on redundant software clients to ensure chain stability in the event of bugs, some development efforts will become more specialized and developers will also look to AI-assisted formal verification. Developers are increasingly turning to artificial intelligence to secure protocol upgrades, which can significantly reduce the engineering resources needed to ship new software proposals.
At the same time, the Foundation is downsizing its Privacy and Scaling Exploration Division as an independent research division and shifting cryptographic expertise to direct implementation within the protocol.
The organization’s flagship developer conference, Devcon, will be scaled down to a more modest format, with institutional support narrowing the focus to very specific, reproducible deployment test cases.
Buterin also said he intended to personally fund certain broader megaprojects outside the foundation’s new constraints.
Buterin said he prefers Ethereum’s “soft and lean” model in the long term. Once Strawmap is complete, protocol development will primarily focus on security fixes and a limited number of high-value improvements, and the threshold for adding new features will be much higher.
Such an approach could reduce the permanent costs of maintaining Ethereum and limit the number of opportunities that corporations, governments, or concentrated interest groups could influence Ethereum’s development.
Ultimately, Buterin said that rather than learning from sprawling software projects, Ethereum should learn from Bitcoin’s narrower approach to protocol changes.
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