The Ethereum Foundation publicly laid off employees for the first time, sparking controversy over strategic adjustments. Is the foundation model no longer effective?

Author: Nancy, PANews

In the face of increasing external doubts about the ambiguity of its technical direction, low collaboration efficiency, and centralized governance, the Ethereum Foundation (EF) is undergoing a profound organizational restructuring.

The R&D team has been renamed and reorganized, and the strategic adjustments have sparked controversy.

On June 2nd, the Ethereum Foundation announced a restructuring of its research and development team, making significant architectural adjustments to the internal "Protocol Research and Development Team (PR&D)" and officially renaming it to "Protocol." This reconstruction is considered not merely a simple organizational adjustment, but a systematic transformation from strategic goals and talent allocation to governance concepts.

The newly formed "Protocol" team will focus on three strategic goals: scaling the mainnet (L1), enhancing data availability (blobs), and improving user experience (UX), in order to establish a closer collaboration mechanism and a clear resource allocation method.

The Ethereum Foundation has made it clear that the new Protocol team will develop three strategic goals and have a leader for each strategic direction, namely Tim Beiko and Ansgar Dietrichs for L1 scaling, Alex Stokes and Francesco D'Amato for blob scaling, and Barnabé Monnot and Josh Rudolf for improving the user experience. They will be supported by renowned researcher and cryptographer Dankrad Feist. Feist, the name of Ethereum's new sharding scheme "danksharding", resigned as an advisor after sparking controversy over his advisory relationship with Ethereum's re-staking protocol EigenLayer over the acquisition of a large number of tokens.

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Ethereum Foundation Reorganization of Organizational Structure Source: Internet

At the same time, the foundation also stated that some R&D members will no longer continue to stay. Although the official has not disclosed a specific layoff list, looking at the changes in the PR&D restructuring, about a dozen R&D personnel have left, and the departmental responsibilities have become more detailed and clear. EF encourages other ecological projects to absorb this group of experienced talents and announced the recruitment of new members, with key positions including the head of user experience and the head of performance engineering.

The Ethereum Foundation stated that this reorganization will accelerate the pace of converting research results into products and advance the scalability and user-friendliness of Ethereum with higher standards.

"We hope that this brand new organizational structure will enable internal teams to focus more and drive key initiatives forward. At the same time, we also have to make some very difficult decisions. It is heartbreaking to say goodbye to those talented and diligent colleagues. This decision does not reflect a disregard for their value or contributions," said Hsiao-Wei Weng, co-executive director of the Ethereum Foundation.

However, the restructuring of the Ethereum Foundation has also sparked a fierce response from core developers and the industry. "At this very moment, the word 'decentralization' was quietly and permanently removed from Ethereum's roadmap." Peter Szilagyi, a core developer at Ethereum, said that great companies have long understood that their most valuable asset is people – team members. Google even makes it clear in its onboarding playbook: developers take precedence over users, and the latter can be found everywhere. Organizations that fail to understand this will eventually be marginalized. Yes, that's the subtext.

Kyle Samani, co-founder of Multicoin Capital, also questioned the strategic adjustments of the Ethereum Foundation, pointing out that the definition of "focus" typically means reducing rather than increasing, especially emphasizing that there should be no conflict between goals. When considering from the perspective of the third goal (i.e., L1 and L2 network expansion to improve user experience), the first goal (i.e., layoffs) contradicts the second goal (i.e., clarifying responsibilities).

Miles Jennings, head of policy and general counsel at a16z crypto, recently pointed out that the crypto industry needs to move beyond the non-profit foundation model because it is no longer fit for purpose. He believes that although foundations played a role in circumventing regulation and promoting decentralization in the early days, they have now evolved into gatekeepers of centralized control due to problems such as misalignment of incentives, legal and economic constraints, and operational inefficiencies. With the U.S. Congress proposing a control-based maturity regulatory framework, the crypto industry has an opportunity to move away from foundations. Ordinary development companies are better structured than foundations, able to deploy capital efficiently, attract top talent through equity incentives, and achieve rapid response and sustained growth with market feedback. Jennings emphasized that the company aligns with token holders' incentives through market discipline and clear financial metrics (e.g., revenue, profit margins), while the foundation struggles to optimize resource allocation due to a lack of accountability and profit drive, and employee incentives are limited by token price fluctuations. Public interest corporations, network revenue sharing, milestone token lock-up periods, and contract protection existing tools address potential misalignments between companies and token holders. In addition, two emerging schemes, DUNA and BORGs, provide a streamlined path to implement these solutions while eliminating the cumbersomeness and opacity of the Foundation's structure. The next era of crypto will be built on systems that scale – systems with real incentives, real accountability, and real decentralization.

Promoting internal organizational restructuring, a delayed self-correction.

The restructuring of the Ethereum Foundation did not come suddenly, but rather was a culmination of years of accumulated structural contradictions and a concentrated outbreak of external criticism.

In the past, the Foundation has been criticized for being overly obsessed with long-term research, ignoring the short-term needs of users and developers, and questioning its centralized governance structure. For example, Hari, a former engineer at the Ethereum Foundation, bluntly pointed out this year that Ethereum and its Virtual Machine (EVM) lack a clear and cohesive technical vision, and that research and development is slow. Without decisive change, the future could be rigid. He recommends reducing reliance on pure research and moving towards a product-oriented delivery cadence.

A similar cry came from Anthony DOnofrio, an early member of Ethereum, who criticized EF for its structure as a "centralized, decentralized organization" with executive directors, a finance department, and a circle of paid developers, which, while effective in coordination, deviated from the ideal of decentralization, calling for the future of Ethereum to require not only technical research, but also "visionary leaders" who understand its social and political implications.

Aave founder Stani Kulechov also tweeted earlier suggesting that the Ethereum Foundation reform its budget and operational structure, dismiss irresponsible members, and allocate resources based on capability. He emphasized that the Ethereum Foundation should be a streamlined and efficient organization.

Co-founder Vitalik Buterin's role in the Ethereum Foundation, Ethereum's most symbolic soul has also been controversial for a long time. For example, in February of this year, community member Ameen Soleimani even launched a poll on whether Vitalik should play the role of "king" (governance decision-maker) or "prophet" (value leader) in the Ethereum ecosystem, with 80.1% of voters believing that he is closer to the latter. In response, Vitalik said, "The claim that I have three of the five seats on the EF Board of Directors has ceased to be true since 2017, and since then I have only had one of the three seats." ”

In the face of criticism and structural challenges, the Ethereum Foundation also launched several internal reform initiatives earlier this year. As early as January, Vitalik publicly announced a transformation of the foundation's leadership model, aiming to enhance technical professionalism and strengthen communication with developers. According to Haseeb Qureshi, managing partner at Dragonfly, the EF leadership at that time gradually broke away from the "not invented here" mentality, demonstrating greater tolerance and openness to external ideas.

In February, Aya Miyaguchi, the former executive director of the Ethereum Foundation, was promoted to chairman. Aya has been an advocate of a "subtractive philosophy", arguing that foundations should avoid becoming highly centralized authorities, promoting decentralization and community-led decentralization, and likening Ethereum to an "infinite garden" that encourages an open, permissionless innovation ecosystem that emphasizes long-term sustainability rather than short-term benefits. However, her idealistic style has also sparked some controversy, with some questioning it as too abstract and lacking in execution. After Aya became the chairman, she was mainly responsible for promoting strategic cooperation and maintaining relationships, and would reduce the direct participation in specific affairs, which was once interpreted by the community as "rising and falling".

In addition, the Ethereum Foundation has also launched an exploration of the combination of AI and governance, hired Devansh Mehta as the head of AI × public goods governance, and continued to strengthen the technical backbone, appointing Hsiao-Wei Wang and Tomasz Stańczak, who are key contributors to the Ethereum Beacon Chain and founders of the Nethermind execution client, respectively, as co-executive directors.

While there are frequent high-level adjustments, the core members of the Ethereum Foundation are also continuing to lose. For example, in January this year, Eric Conner, the core developer of Ethereum, announced his withdrawal from the Ethereum Foundation in a post on social platforms, pointing out that EF has problems such as opacity, disconnection from the community, and resistance to change, and believes that the foundation can still operate normally after cutting its budget by 80%. Ethereum Foundation researcher Danny Ryan also announced his exit in 2024 after seven years of contributing to the foundation, and on the eve of Aya's appointment, he was seen as the most supported potential leader in an informal community survey, reflecting the community's strong expectations for do-it-yourself tech talent. The aforementioned Peter Szilagyi, the maintainer of Ethereum's core client Geth, also announced his temporary departure in November last year, ending his nearly 10-year Ethereum career. He once confessed that "Ethereum is losing its way." ”

It can be said that this organizational transformation of the foundation is both a belated self-correction and an experiment in sustainable governance models for the future. However, how to balance idealism with execution efficiency, technological research and development with ecological coordination, and the vision of decentralization with practical governance will be a long-term proposition for the EF and the entire Ethereum ecosystem in the next phase.