Why is the Ethereum Foundation laying off staff and restructuring? Ethlabs steps into the spotlight, protocol governance enters a new phase

On June 23, 2026, the Ethereum Foundation (EF) officially announced the end of a months-long organizational restructuring, laying off 54 employees, approximately 20% of its total staff. On the same day, co-founder Vitalik Buterin confirmed that the foundation would cut about 40% of its annual budget.

Behind this announcement is the most profound governance restructuring in Ethereum’s ecosystem operation in over a decade. The foundation is shifting from being a “core builder” to a “lightweight protocol governance and maintenance organization.” What does this “downsizing” really mean? And what far-reaching impacts will it have on the Ethereum ecosystem?

Cutting 54 Staff Is Just the Result; What Is the Logic Behind the Restructuring?

This restructuring is not an isolated personnel adjustment but the final implementation of a series of strategic contractions by the Ethereum Foundation since 2025. As early as June 2025, the foundation introduced new fund management policies, clarifying plans to gradually reduce funding for ecosystem projects. In March 2026, the foundation further released the “Mission Declaration” and “Funding Management Policy,” providing an institutional framework for this restructuring.

The direct triggers for layoffs include two levels: financial pressure and strategic focus.

On the financial side, the foundation’s previous annual expenditure accounted for about 15% of its remaining funds, with a long-term goal to reduce this ratio to around 5% after 2030. A 40% budget cut means the foundation must significantly compress operational costs. Strategically, the foundation has clarified that resources will be concentrated on “key tasks only EF can and must undertake”—namely, protocol-level resistance to censorship, open source, privacy, and security (CROPS) assurance.

Senior Leadership Continues to Depart, Governance Stability Faces Challenges

The restructuring did not occur in a vacuum. Since January 2026, about nine senior figures have left or changed roles. This includes co-Executive Director Tomasz Stańczak (departed in February 2026) and Xiaowei Wang (Wang, Xiaowei, departed this month). The successive departures of several core researchers have raised questions about the continuity and execution capability of the foundation’s governance.

Vitalik Buterin himself expressed complex emotions: “I have great respect for my colleagues at the foundation, so I cannot pretend that nothing precious has been lost.” This statement acknowledges the reality of talent loss while also hinting at the necessity and difficulty of the restructuring.

It’s worth noting that the wave of senior departures overlaps heavily with the timing of layoffs, but they are not the same event. Layoffs are proactive organizational adjustments, while senior departures more reflect individual choices and tensions with organizational direction. The overlap has subjected the Ethereum Foundation to personnel turbulence far beyond usual.

Five Major Clusters Implemented; How Will the New Organizational Structure Operate?

Post-restructuring, the Ethereum Foundation has adopted a brand-new five-cluster architecture, supplemented by an operations cluster and management support team.

The five core clusters are:

Protocol Layer — Responsible for EF’s traditional core mission, ensuring Ethereum’s protocol continues to strengthen resistance to censorship, open source, privacy, and security (CROPS). Work includes defending against harmful MEV, advancing post-quantum cryptography, zkEVM, and L1 privacy research.

Access Layer — Ensures users have alternative options for reading on-chain data, transacting, staking, and exiting without relying on unverifiable intermediaries. Its core principle is “zero options”: every intermediary path must correspond to a trusted, trustless path.

User Layer — Focuses on user segmentation research and impact assessment, ensuring development decisions at the protocol and access layers accurately respond to real user needs.

Community Layer — Maintains EF’s independent image and collaborates with open-source communities in privacy encryption, civil liberties, and decentralized networks.

Institutional Layer — Handles EF’s engagement with financial institutions, enterprises, governments, universities, and non-profits, while monitoring policy and regulatory developments.

Each cluster has its own internal structure and accountability mechanisms. The core logic of this architecture is specialized division of labor: clarifying previously fuzzy functional boundaries so each segment can be responsible for its outputs.

Budget Cuts of 40% Signal a Fundamental Reconfiguration of Financial Models

The 40% budget reduction is the largest quantitative change in this restructuring. But more importantly, it signifies a fundamental shift in the underlying financial logic.

Previously, the foundation’s operating model resembled a “spending organization”—drawing from its reserves annually to fund R&D, grants, and operational expenses. The new direction is toward a donation fund (Endowment Fund) model: relying on investment returns on principal to sustain long-term operations, rather than continuously depleting the principal.

The goal is to reduce annual expenditure from about 15% of the treasury to roughly 5% after 2030. To achieve this, the foundation plans to decrease direct ETH sales and instead depend on staking yields and DeFi income to support operations.

At the project level, this means the gradual shutdown of the “Privacy and Scalability Exploration (PSE)” department, scaling back the Devcon conferences, and converging external partnership strategies. Resources will be more focused on core protocol development and security.

Foundation Retreats, Ethlabs Takes the Front Stage

Almost simultaneously with the foundation’s contraction, a new organization was born.

On June 22, 2026—one day before the foundation announced its restructuring—five former Ethereum Foundation researchers established an independent non-profit R&D organization Ethlabs. The organization received support from major publicly traded ETH treasury companies BitMine Immersion Technologies and SharpLink Gaming, as well as Ethereum co-founder Joseph Lubin.

Ethlabs’ positioning sharply contrasts with the foundation. While the foundation retreats and focuses on protocol governance, Ethlabs advances toward institutional adoption and market transformation. Its early work centers on key needs for large-scale on-chain adoption: faster settlement, native asset issuance, cross-chain transactions based on robust infrastructure, mainnet capacity expansion, and foundational research supporting ETH’s monetary properties.

This back-and-forth clarifies the organizational division of labor within the Ethereum ecosystem: the foundation no longer attempts to cover all aspects from research to promotion but delegates execution functions to more specialized, focused organizations.

Notably, Vitalik Buterin is not listed among Ethlabs’ supporters. This is widely interpreted as a deliberate restraint—avoiding giving any single organization too strong a personal endorsement—thus shifting Ethereum’s narrative from “founder-driven” to “multi-organization collaborative development.”

Reshaping Ecosystem Governance; Accelerating Decentralization of Power

In a longer-term perspective, this restructuring marks a significant node in Ethereum’s governance evolution.

The Ethereum Foundation has long played multiple roles: protocol researcher, core developer, ecosystem funder, community organizer, and spokesperson. This “all-in-one” model was necessary in Ethereum’s early days—when the ecosystem was immature and needed a central organization to coordinate resources and direction.

But as the ecosystem expanded, the drawbacks of this model became increasingly apparent: decision-making slowed, strategic messaging became vague, and ecosystem mobilization weakened. Criticisms of Ethereum have extended from price performance to governance structures.

This restructuring, along with the establishment of Ethlabs, points toward a clear direction: Ethereum is moving from centralized governance to a multi-center ecosystem governance. The foundation is no longer the sole hub but a node among several specialized organizations—though still a very important one.

This transition also carries risks. Decentralization of power may increase coordination costs, diverging organizational strategies could intensify, and loss of core talent might impact protocol development continuity. Balancing “decentralization” with “effective coordination” will be a key challenge for Ethereum’s next phase.

Summary

Ethereum Foundation’s restructuring—layoffs of 54 people (20%), 40% budget cuts, and the implementation of five core clusters—is not just a slimming down but a systemic overhaul of governance models. The foundation is shifting from “builders” to “governors,” from “all-in-one” to “professional division of labor.”

Meanwhile, the emergence of Ethlabs fills the operational gap left by the foundation’s retreat, marking a move from a single-organization-driven model toward multi-organization collaboration. The effectiveness of this transition remains to be seen, but the direction is clear: Ethereum is experimenting with more decentralized, professional approaches to address the increasingly complex governance challenges of its expanding scale.

FAQ

Q: How many people did the Ethereum Foundation lay off? What proportion is that?

The foundation laid off 54 positions, about 20% of its total staff.

Q: How much is the budget cut?

The foundation will cut about 40% of its annual budget this year. The long-term goal is to reduce annual expenditure to about 5% of the treasury after 2030.

Q: What is the new organizational structure after the restructuring?

The foundation is divided into five core clusters: Protocol Layer, Access Layer, User Layer, Community Layer, and Institutional Layer, plus an operations cluster and management support team.

Q: What is Ethlabs? How does it relate to the foundation?

Ethlabs is an independent non-profit R&D organization founded by five former Ethereum Foundation researchers on June 22, 2026, focusing on institutional adoption and market transformation. It complements the foundation—while the foundation focuses on protocol governance, Ethlabs emphasizes execution and outreach.

Q: What impact does this restructuring have on the Ethereum ecosystem?

It signifies a shift from a single organization-driven model to a multi-organization collaborative governance, accelerating decentralization of power. In the short term, it may face increased coordination costs and talent attrition, but in the long term, it aims to improve overall efficiency and specialization within the ecosystem.