Two stories, one network. In Q1 2026, the Ethereum network set an all-time high of 200.4 million transactions, according to Ethereum Foundation data. Over that same period, ETH lost more than 44% of its value since the start of the year, per CoinGecko figures.
Caught between those two realities, on June 23 the Ethereum Foundation announced the deepest restructuring in its history: 54 layoffs, roughly 20% of its workforce, and a 40% cut to its operating budget.
The cuts announced on June 23
2026 operating budget reduction and headcount cut (54 out of approximately 270). Source: Ethereum Foundation, Vitalik Buterin
What the Foundation actually announced
The organization that has long guided Ethereum’s development is restructuring around five clusters: protocol, access, users, community, and institutional, each supported by operational functions. This formalizes a direction set by the March 2026 Mandate and the treasury policy adopted in June 2025.
Among the cuts is the closure of PSE, the Foundation’s internal research unit focused on privacy and zero-knowledge cryptography. Priorities are narrowing to what the Foundation calls CROPS: censorship resistance, openness, privacy, security, and Layer 1 scaling.
Vitalik Buterin did not soften the human cost. In a post on X on June 23, he described those leaving as dedicated engineers and researchers, some with nearly a decade on Ethereum, and stated plainly that “a lot was lost.” The downsizing follows nine senior departures since January, including former co-executive directors Tomasz Stańczak and Hsiao-Wei Wang.
Why now: the endowment model explained
Functionally, the driver here isn’t a budget shortfall. It’s a deliberate strategic choice. The Foundation wants to shift from a model that spends down capital to an endowment model, where only investment returns are spent, not the principal itself. The goal is indefinite sustainability rather than a runway that eventually runs out.
The plan, as stated in the EF Treasury Management Policy published in 2025, is to reduce the annual spending rate from roughly 15% of treasury assets (the average through 2025) to approximately 5% by 2030. This year’s 40% budget cut is the single largest step in that direction.
From 15% to 5%: the endowment plan
Annual treasury spend rate, indicative path toward the 2030 target. Source: EF Treasury Management Policy, 2025
15%5%202520262027202820292030
The treasury remains substantial, though leaner than it once was. According to Arkham data, the Ethereum Foundation’s ETH reserves are currently valued at roughly $209 million, close to a six-year low, partly due to price depreciation. This is not a liquidity crisis. The Foundation holds a multi-year operational buffer, and Fundstrat’s Tom Lee stated on record that there is “zero chance” of financial collapse, even as an internal source flagged a $20 — 30 million funding gap affecting core development teams.
The Real Paradox: Record Usage, Depressed Price
This is the tension that matters most to investors. Ethereum is not facing an adoption crisis. The network is processing volumes it has never seen before, institutions from BlackRock to JPMorgan are building on top of it, and regulated products keep multiplying, including low-fee spot Ethereum ETFs now widely available.
Yet the token itself hasn’t followed. ETH fell 44% in 2026 and US spot ETFs recorded seven consecutive weeks of net outflows totaling close to $1 billion, per CoinGlass figures. The disconnect between network usage and token value is the defining feature of this cycle for Ethereum.
Who Picks Up the Baton
The more revealing signal isn’t the headcount cut itself, but what surrounds it. Buterin publicly repositioned the Foundation as “one of many stewards” of Ethereum, stepping back from its role as the network’s central engine. This is a deliberate decentralization of development authority.
At the same time, ETHLabs has emerged as a new independent entity, backed by treasury companies BitMine and SharpLink alongside co-founder Joseph Lubin, designed to accelerate the technical roadmap alongside a leaner Foundation. The strategic question now shifts there: whether the broader ecosystem, spanning DeFi protocols, Layer 2 networks, and players like Consensys, can absorb the research capacity the Foundation has chosen to release.
This is not the story of an organization in decline. It’s a deliberate transformation: leaner, more focused, built to outlast market cycles rather than be defined by them. The metric worth watching over the next few quarters isn’t any single price move. It’s whether research continuity holds under the new structure.
This article is for informational purposes only and does not constitute financial or investment advice. Crypto assets carry significant risk and you may lose part or all of your invested capital.
