The Ethereum Foundation has been quietly shrinking for months. Nine senior people left since January. Both co-executive directors were gone by June. The ZK privacy research unit that built some of Ethereum's most important tooling had been winding down. So when the Foundation announced on June 23 that it was cutting 54 jobs and slashing its budget by 40%, it was not exactly a surprise. It was more like an official stamp on a process that had already been happening.
But the scale still matters, and so does the direction. This is not a cost-cutting exercise at a struggling startup. This is Ethereum's primary development and research organization deliberately making itself smaller, on purpose, as a strategy. Whether that is brilliant or reckless depends heavily on whether the ecosystem outside the Foundation can pick up what the Foundation is putting down.
What the Foundation actually announced
The announcement came via a blog post from Vitalik Buterin on June 23. The core facts: 54 full-time positions eliminated, about one in five of the roughly 270 people who worked there. The 2026 operating budget cut by 40%. The organization restructured into five domain-focused clusters covering protocol, access, user, community, and institutional layers, plus operations. The ZK and privacy research unit called Privacy and Scaling Explorations, or PSE, shut down entirely.
Buterin was direct about the human cost. "I respect my EF colleagues far too much to pretend that there was not much that is lost," he wrote. The departing employees receive at least one month of severance per year of service, a retirement payment, and support for finding other positions in the ecosystem. That is a reasonable package. It does not make the cuts sting less for the people affected.
The stated long-term goal is to reduce annual spending from the current roughly 15% of treasury assets to about 5% by 2030, a model the Foundation calls endowment-style. The idea is that at 5%, the Foundation can theoretically run forever on its treasury without depleting it.
Why now, and what drove it
The restructuring did not come out of nowhere. It is the conclusion of a process that started in June 2025 when the Foundation adopted a new mandate and tighter treasury policy. A 38-page document formalizing that mandate was published in March 2026. The layoffs are the operational consequence of those decisions finally being executed.
There is also a philosophical shift buried in the language. The Foundation's 2026 Mandate explicitly repositioned it from Ethereum's "primary guardian" to "one of many guardians." That is a significant change in self-conception. The old model was: the EF is Ethereum's core. The new model is: the EF is one organization in a coalition, and other organizations should be doing more of the work.
Nine senior figures have left since January 2026, including both co-executive directors Tomasz Stanczak in February and Hsiao-Wei Wang in June. Bastian Aue is now the sole interim executive director. That level of leadership turnover in six months is, to put it plainly, a lot. Whether the departures drove the restructuring or the restructuring drove the departures is not entirely clear from the outside, but the two things happened together.
The ZK research unit closure
This is the part I find most concerning, and I think it is getting underreported relative to the headline job numbers.
PSE, the Privacy and Scaling Explorations unit, was the team building zero-knowledge proof tooling for Ethereum. ZK proofs are one of the most technically demanding and strategically important areas of blockchain development. PSE produced tools that other builders used. When it closes, those capabilities do not automatically transfer to somewhere else. They just stop, at least inside the Foundation.
Ethereum's own roadmap targets post-quantum cryptography deployment between 2028 and 2032. That kind of long-horizon applied cryptography research needs people doing it full-time, funded consistently, without being dependent on market conditions. The new five-cluster structure includes "L1 privacy" as a research goal for the protocol cluster, but the team with the deep applied engineering expertise in that area has been disbanded. That gap is real and it is not obviously filled.
Ethlabs: the replacement or the distraction
On the same day the Foundation announced its restructuring, a new organization called Ethlabs launched. It was founded by five former senior EF researchers and is backed by Ethereum co-founder Joseph Lubin alongside two publicly traded Ethereum treasury companies, BitMine and SharpLink.
The Foundation acknowledged Ethlabs' launch directly, framing it as part of the "coalition of organizations" model. The idea is that what the EF steps back from, independent organizations like Ethlabs step into.
That framing is reasonable in theory. In practice, there is a meaningful difference between a centralized nonprofit with a long-term treasury and consistent funding versus a new organization backed by companies whose balance sheets move with ETH price. If ETH stays under $2,000 for another year, will the treasury companies still be writing research checks? Maybe. But that introduces a market-conditional dependency into what used to be independent, long-term research. That is a structural change worth paying attention to.
The real risk nobody is talking about
Former EF contributor Trent Van Epps, who coordinated core development at the Foundation from 2021 until April 2026, said last week that Ethereum's core developer ecosystem could hit a funding crisis within three to nine months. The four-year Client Incentives Program that paid for more than ten client teams expired in April 2026 and has not been replaced. Maintaining those client teams costs roughly $30 million annually according to Van Epps' estimate.
The restructuring does not directly address this. The Foundation's new endowment model and the five-cluster structure are about how the EF organizes itself going forward. The question of who funds the independent client teams that keep Ethereum's protocol diverse and resilient is separate, and it is not answered here. Protocol Guild, the independent collective that distributes donations to Ethereum contributors, has distributed about $38 million since 2022. That is not nothing. It is also not a guaranteed annual $30 million.
This is the part of the story I would watch. Not the headline job cuts, but whether the underlying protocol development funding gap gets closed.
What this means for ETH
The short-term price reaction was mostly absorbed by the broader market. ETH was trading around $1,660 before the announcement and fell with everything else as BTC slid toward $60,000. The EF news did not cause a sharp separate ETH sell-off, which tells you the market was more focused on macro than on this specific event. ETH is down roughly 10% from a week ago regardless.
Longer term, the picture is more nuanced. The bullish read is that the EF becoming leaner and distributing development across a coalition of organizations is actually healthy decentralization. No single point of failure. More groups doing more things. ETH does not need the Foundation to be big to succeed.
The bearish read is that long-horizon, coordination-heavy research like post-quantum cryptography and ZK privacy is exactly the kind of work that requires a stable institution with guaranteed funding, and the EF just made itself smaller in exactly that area. If the distributed model does not fill the gap fast enough, Ethereum's technical roadmap could slip.
My honest take: this is a bet that the Ethereum ecosystem is mature enough to develop without a large central Foundation. That bet might be right. It has not been tested yet.
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