Ethereum Foundation Undergoes Extensive Restructuring, Cutting 54 Employees

The Ethereum Foundation announced the layoff of 54 employees, representing approximately 20% of its total workforce, while Vitalik Buterin also announced a 40% reduction in its overall budget for the calendar year 2026.

6/26/20264 min read

Structural transformation - reorganization into five clusters

The Ethereum Foundation has reorganized its remaining workforce into five clusters focused on specific areas, replacing the previous organizational structure and establishing an architecture where the foundation concentrates entirely on tasks requiring its unique position rather than attempting to encompass the entire evolution of the Ethereum ecosystem. The five clusters – protocol layer, access layer, user layer, community layer, and institutional layer – establish distinct organizational focus areas with specialized operational and management support functions, maintaining coordination across the clusters.

The protocol layer handles scaling and enhancing security for the Ethereum mainnet, including developing consensus mechanisms, a transaction proof-of-stake system, and network state management—factors critical to the blockchain's long-term technical integrity. The access layer focuses on enabling users and developers to transact, read, and authorize on-chain transactions through improved interface tools and infrastructure. The institutional layer manages enterprise participation, financial infrastructure, and policy coordination—factors critical to the adoption of mainstream financial services. The cluster architecture reflects the organizational assessment that the competitive advantage of focusing on specific protocol and coordination functions is more important than the previously broad ecosystem development spanning dozens of initiatives simultaneously.

The dissolution of PSE and the ZK research gap.

The most significant technical consequence of the restructuring relates to the dissolution of the Privacy and Scalability Exploration unit (recently renamed Ethereum Privacy Managers), the Ethereum Foundation's internal application cryptography team responsible for non-disclosure proof tools, including MACI for private voting, Semaphore for anonymous credentials, and PlasmaFold for privacy-enabled Layer 2 transactions. The dissolution of the PSE eliminates Ethereum's key internal ZK research capability precisely at a time when non-disclosure proof technology is gaining importance as a mainstream blockchain infrastructure across many competing blockchain ecosystems.

Buterin described the ZK research transition as a deliberate strategic repositioning rather than a relinquishment of capability, stating that work on non-disclosure proofs would shift "from discovery to direct use in protocol and access layer systems," reflecting an assessment that ZK technology was mature enough to justify direct integration into protocols rather than continuing the exploratory research phase. However, former collaborator Trent Van Epps warned that the core development ecosystem is facing a structural financial gap within the next three to nine months as the Client Incentive Program expires coinciding with budget cuts, creating a scenario where the ZK research gap emerges concurrently with the end of the incentive program.

Ethereum blueprint and third protocol evolution

Buterin described the restructuring as supporting the "third major evolution" of the Ethereum protocol through the Ethereum Sketch initiative, reshaping key blockchain components including consensus mechanisms, proof-of-transaction systems, security infrastructure, user account management, and network state management. The Sketch represents an ambitious technical agenda, requiring sustained technical investment while operating with significantly reduced organizational capacity, creating implementation challenges as organizations must accomplish more complex protocol work with smaller dedicated teams.

The integration of AI-assisted formal verification represents a mechanism proposed by Buterin, enabling protocol research efficiency to be achieved, partially offsetting workforce reductions, with the organization's plan to "rely more on AI-assisted formal verification to sustain protocol research with fewer staff." The AI integration reflects the belief that modern artificial intelligence capabilities can enhance the productivity of human protocol researchers sufficiently to maintain research pace despite a 20% workforce reduction.

Ethlabs - A Decentralized Development Ecosystem

The launch of Ethlabs a day before the Ethereum Foundation announced its restructuring provided clear evidence of a broader trend in which former EF researchers are forming independent organizations that maintain Ethereum protocol research capabilities outside the direct control of the foundation. The launch of Ethlabs, supported by BitMine, SharpLink, and Lubin's Consensys, creates an alternative funding channel for Ethereum research through corporate financial management entities rather than a non-profit fund model.

The emergence of this parallel development ecosystem reflects the broader warming of the Ethereum ecosystem, where multiple independent organizations can collectively maintain protocol development that previously depended on a single institutional entity. However, the complexity of coordination among multiple independent organizations poses a risk of fragmentation as research priorities differ and collaborative development speeds are slower compared to a centralized organizational model.

Assessment and Conclusion

The restructuring of the Ethereum Foundation marks a significant turning point in the organization, establishing a permanent transition of the foundation from a holistic ecosystem development organization to a specialized protocol management entity, maintaining a centralized mission while ceding broader ecosystem development responsibilities to independent organizations. This transition reflects Buterin's assessment that the Ethereum ecosystem has achieved the maturity and institutional depth necessary to sustain growth across multiple independent organizations rather than requiring a single centralized foundation to run all critical initiatives.

For the development of the Ethereum protocol in particular, the dissolution of the PSE and the expiration of the customer incentive program create a risk of short-term funding shortfalls, requiring a rapid response from ecosystem stakeholders, including independent research institutions, corporate finance regulators, and crowdfunding programs. According to Van Epps, a funding shortfall of three to nine months highlights the urgent need for coordination among stakeholders in the Ethereum ecosystem to avoid disrupting the continuity of critical research.

Disclaimer: The information presented in this article is the author's personal opinion in the field of cryptocurrencies. This is not financial or investment advice at all. Every investment decision should be based on careful consideration of your personal portfolio and risk tolerance. The opinion in the article does not represent the official position of the platform. We recommend that readers do their own research and consult experts before making any investment decisions.

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