The Foundation is shrinking to survive. But what signal does selling into a downturn send — and can the organization that gave us the EVM still make its next leap?
Date: May 25, 2026 | Reference point: 2026-05-20
⚠️ This column is for informational and research purposes only and is not investment advice or a solicitation to buy or sell any asset. All price and return figures are estimates based on publicly available data as of the writing date and vary by source.
1. "A Smaller Ship" — The Foundation Begins to Shrink Itself
On May 24, 2026, Vitalik Buterin publicly declared he would turn the Ethereum Foundation (EF) into a "smaller ship": selling less ETH, prioritizing decentralization, privacy, and censorship resistance over raw speed, and reorganizing the body amid a wave of high-profile departures.
This was not a sudden move but the culmination of a year-and-a-half-long arc. In chronological order:
| When | Event |
|---|---|
| Feb 2025 | Aya Miyaguchi moves from executive director to "president"; Vitalik signals a leadership rework |
| Feb 2025 | Hsiao-Wei Wang and Tomasz Stańczak appointed co-executive directors |
| Mid-2025 | R&D consolidation + first-ever public layoffs |
| Jun 2025 | New treasury policy — 15% opex cap, reduced linearly toward 5% over five years |
| Feb 2026 | Stańczak resigns as co-executive director less than a year into the role |
| 2026 (YTD) | 7+ core members or senior contributors depart |
| Mar 2026 | EF releases a 38-page mission statement |
| May 24, 2026 | Vitalik's "smaller ship" declaration — reduced ETH sales, narrowed mission |
The Foundation's logic is clear. Vitalik noted that the EF holds only about 0.16% of all ETH — less than several individual holders — in contrast with rival chain foundations that often control 10–50% of supply. He also argues that the EF's original 2014 sale-document mandate — the build through Frontier, Homestead, Metropolis, and Serenity — was already complete with the 2022 Merge. The mission is done; therefore the organization should conserve resources and narrow its scope.
Up to this point it reads as "a responsible nonprofit putting its finances in order." The problem is timing and signaling.
2. Selling Into a Downturn — When Good Treasury Policy Becomes a Bad Signal
The treasury policy itself is reasonable. It caps opex at 15% of the treasury annually, keeps a 2.5-year buffer in reserve at all times, files quarterly financial reports to the board, and publishes an annual report. The plan to reduce operating expenditure linearly to a 5% baseline over five years is the textbook way to strengthen long-term agency. Vitalik invoking Google as a cautionary example of an organization drifting from its early values fits the same frame.
But a financially correct decision and the signal it sends to the market are two different things.
The EF's ETH sales drew fierce community criticism in early 2025. The crux was when it sold. With ETH trading well below its November 2021 peak — and during a bull cycle in which ETH lagged Bitcoin and Solana — the Foundation's decision to sell was read by the market as "insider pessimism." The fact that the EF holds only 0.16% cuts two ways: (a) the supply shock to the market is negligible, yet (b) the signaling value of selling that small a stake precisely during a downturn is, if anything, larger.
From an investor's perspective, the asymmetry breaks down as:
- Supply side: 0.16% is not enough to move the market. The price impact of the selling itself is overstated.
- Signal side: The group that understands the protocol best converting to cash in a down market moves sentiment more than fundamentals. Overlapping with a period when ETH was trailing rivals, it worsened the narrative.
- Improvement side: Since 2025, generating treasury yield through a staking program and supplying liquidity to DeFi (Aave, Spark, Compound) to reduce reliance on outright sales is a positive. Vitalik's May declaration that the EF will "sell less ETH" reads as a direct acknowledgment of this signaling problem.
In the end the Foundation stood where two goals — financial soundness and market signaling — collide, and the 2026 pivot is a correction conscious of the latter.
3. The Three-Year Scorecard — ETH vs SOL vs BNB (2023 → 2026.5.20)
Numbers over words. Looking at how each chain's token moved over the same window reveals the substance of "Ethereum fatigue." (The table below organizes year-by-year movement from public data; figures vary by source and aggregation method.)
| Year | ETH | SOL | BNB |
|---|---|---|---|
| 2023 | +93% (closed ~$1,200s) | +919–997% (closed ~$109) | H2 recovery, year-end rebound |
| 2024 | +46% | +86% (closed ~$189, high $256) | Reclaimed $400 → $500–750 range |
| 2025 | Relative underperformance within the bull market (trailed BTC and SOL) | High of $294 early in the year, then correction, ~-20% for the year | Broke out of range in July, strong |
| 2026 (~May) | ~$2,300–2,400, volatile sideways | ~$105–125, on-chain activity slowing | ~$640–780 |
The key observation is not absolute return but the migration of the narrative.
- Solana captured the "fast and cheap chain" narrative through its explosive 2023 rebound (~+900–1,000%) and the 2024 pump.fun/memecoin cycle. There were stretches where its DEX volume beat Ethereum's for ten consecutive months. But as memecoin fervor cooled in 2025–2026, both on-chain activity and price slowed — Solana's narrative is sensitive to the speculative cycle.
- BNB cleared its regulatory uncertainty with a $4.3 billion U.S. Department of Justice settlement in early 2024 and rose steadily on the back of its exchange-ecosystem cash cow. Its stability is closer to an "exchange stock" than a "chain."
- Ethereum survived in absolute price terms (still ~60% of DeFi TVL and a majority of stablecoin supply within its ecosystem) but lost ground in relative performance and narrative. Its fundamental edge as "Wall Street's blockchain" and "the home base of stablecoins and RWAs" did not translate into token-price momentum over three years. That gap is the very substance of the "fatigue" felt by investors and developers alike.
Investor takeaway: Ethereum's weakness is not a "dying network" but a gap between fundamentals and price/narrative. Its lead in TVL and stablecoin share remains dominant, yet that lead is not transferring into token value. Whether a trigger that closes this gap appears (e.g., on-time delivery of upgrades, value accrual from L2 back to L1) is the key thing to watch.
4. Long to Build, Late to Ship — Two Debts: L2 Fragmentation and Node Maintenance
Ethereum's real structural problem is not price but the speed and cohesion of its roadmap.
4-1. Layer-2 Fragmentation — When the Scaling Solution Breeds a New Problem
With EIP-4844 (Dencun, 2024), Ethereum introduced blob fees and effectively made L2 the default execution environment. Mainnet fees fell to $0.10–0.20 and L2 fees to $0.001–0.05. The scaling strategy itself worked.
The problem is the cost. As general-purpose L2s proliferated, a liquidity fragmentation crisis arrived. Over $40 billion is now dispersed across more than 55 mutually incompatible chains, degrading user experience, multiplying security vulnerabilities through cross-chain bridges, while each L2 captures fees via its own token and centralized sequencer — value that does not flow back to the Ethereum base layer. The Foundation backing the "Ethereum Economic Zone (EEZ)" in March 2026 to address centralized sequencers and forced-token issues is itself a belated response to this fragmentation.
In short, the rollup-centric strategy of "keep L1 as the settlement and data-availability layer, push execution to L2" was correct — but the transition took too long, and its side effects (value leakage, fragmentation) were not adequately prevented at the design stage.
4-2. Upgrade Delays — The Chronic Fatigue Glamsterdam Reveals
The next-generation upgrade, Glamsterdam, is an "engine overhaul" containing ePBS (enshrined proposer-builder separation), parallel execution via Block-Level Access Lists (EIP-7928), a gas-limit increase (~60M → 200M), and the EVM Object Format (EOF). The ambition is to push L1 toward 10,000 TPS.
The problem is the schedule. Originally targeted for June 2026, the actual mainnet activation may slip to Q3 2026 based on testnet progress and Interop conference feedback. The greater concern is that the subsequent Hegotá upgrade (H2 2026) is a "cleanup and hardening" fork that re-architects core data structures such as Verkle Trees. Re-designing core data structures carries a high risk of unexpected technical friction. The industry rule of thumb — that "Ethereum upgrades have historically shipped 3–6 months later than planned" — supports this worry.
The departure of core personnel casts a shadow over this schedule. Seven to eight seniors left during 2026, and whether the new Protocol Cluster leadership can deliver ePBS and BALs on time is the real test.
4-3. Node and Client Maintenance — Cracks in the Invisible Foundation
The most underrated debt is node and client maintenance. Today 80–90% of blocks are produced through external relays (such as MEV-Boost), which is a centralization risk requiring validators to trust third-party services. Glamsterdam's ePBS aims to enshrine this into the protocol and remove the "middleman" — which, put the other way around, means this critical function has been left dependent on external services until now.
Likewise, the state-bloat problem — the unbounded growth of data nodes must store — is meant to be solved by EIP-4444 (deleting history older than one year) and Verkle Trees, but both remain in the future tense. The very fact that the gas limit was held at 60M as a compromise "to let independent node operators verify and download the chain" shows that the foundation is already stretched taut between decentralization and performance.
The substance of developer fatigue: While Solana pushes client performance with Firedancer, Ethereum is still delivering core improvements it already promised (parallel execution, enshrined PBS, state management). The issue is not a lack of vision but chronically late delivery. That is why Vitalik, conscious of criticism that base-layer innovation had fallen behind high-throughput competitors, shifted to a twice-yearly upgrade cadence.
5. So a Next Leap Is Needed — For the Organization That Created the EVM and Solidity
Here we must keep balance. Pessimism about Ethereum often forgets the greatness of its foundation.
The EVM (Ethereum Virtual Machine) and Solidity were not merely technologies but an innovation that created an industry standard. A Turing-complete execution environment in which anyone can deploy smart contracts, and a developer-friendly language running on top of it — together these defined the grammar of an entire on-chain economy stretching from DeFi to NFTs to stablecoins to RWAs. Solana's SVM, and countless "EVM-compatible" chains (including BNB Chain), grew on or by copying the rails Ethereum laid down. This was capped by the Merge (the transition to PoS) — an unprecedented engineering feat of swapping the engine of a live, hundreds-of-billions-of-dollars network mid-flight.
But there is a curse of the standard-setter. Standards are heavy, and heavy things move slowly. The 2014–2022 mandate (the build) is complete, and the organization and pace designed for that mandate do not fit the competitive environment of 2026. Vitalik's statement that "the mission was completed in 2022" should be read not as a retirement announcement but as a call to redefine the mission.
What the next leap requires is clear:
- Restore delivery. Not vision but execution. Shipping Glamsterdam and Hegotá on their promised schedules is the most powerful card for narrative recovery. The twice-yearly cadence is itself an attempt to break the "slow giant" reputation.
- Accrue L2 value back to the base layer. How to return fragmented liquidity and L2-captured value to Ethereum itself. Experiments like the EEZ must translate beyond abstract slogans into actual token value.
- Rebuild the foundation. Decentralizing node operation (ePBS), solving state bloat (EIP-4444, Verkle), client diversity — the work of hardening the invisible base. Unglamorous, but a condition of survival.
- The paradoxical strength of a smaller organization. Vitalik's "smaller ship" is not a retreat but a bet on focusing on the core and delegating the rest to the external ecosystem. The smaller the Foundation becomes, the more decentralized Ethereum is, which aligns with its original cypherpunk values — if the delegated outside groups prove they can deliver.
6. Conclusion for Investors — What to Watch
The Ethereum Foundation's 2026 is not "decline" but a renegotiation of identity. It is a transition in which an organization that finished its mission defines its next one, and along the way personnel leave and the narrative wobbles. The metric investors should track is not the Foundation's headcount but the following three:
| Watch point | What it means |
|---|---|
| On-time upgrade delivery | Whether Glamsterdam (H1 → Q3 2026?) and Hegotá keep schedule. Slippage confirms "chronic delay" as a structural risk. |
| Client-team independence | Whether All Core Devs coordination thins out due to departures. Whether core-development decentralization holds. |
| Direction of the fundamentals-price gap | Whether the TVL/stablecoin-share lead begins transferring into token value and narrative, or whether momentum keeps ceding to SOL and BNB. |
In short, Ethereum is not technically dead. Its foundation — the EVM and Solidity — remains the industry standard, and its position as the home base of DeFi and stablecoins is solid. But narratively and organizationally, Ethereum stands exactly at the point where it must prove its next leap. If the Foundation, now boarding a "smaller ship," actually achieves the on-time delivery and value accrual it has promised, the gap between fundamentals and price will close. If it does not, the "slow giant" narrative will harden — and that gap will be claimed by competing chains.
The one who sets the standard must prove themselves twice — once through creation, and once through reinvention. The Ethereum Foundation now stands on that second proving ground.
References (as of May 2026)
- Vitalik's "smaller ship" declaration, reduced ETH sales: BeInCrypto, BanklessTimes (May 24–25, 2026)
- EF treasury policy (15% opex cap, 5% five-year baseline), quarterly/annual reporting: CoinDesk (Jun 5, 2025)
- EF's 0.16% ETH holding / rival foundations' 10–50%: BeInCrypto, BanklessTimes
- Core departures (7–8 in 2026), Stańczak resignation, 38-page mission statement: PANews, KuCoin, Phemex
- DeFi liquidity supply (Aave, Spark, Compound), first public layoffs: Ainvest, The Block
- ETH/SOL/BNB year-by-year returns: Motley Fool, Changelly, Axi
- L2 fragmentation ($40B / 55+ chains), EEZ: KuCoin, Decrypt (Mar 2026)
- Glamsterdam schedule slip (June → Q3 2026), Hegotá Verkle Tree risk: PANews, Ainvest, OneKey
- Gas limit 60M → 200M, ePBS / EIP-7928 / EOF / EIP-4444: KuCoin, BingX, ethers.news
Disclaimer: This column is an analysis for research and educational purposes and is not investment advice or a solicitation to buy any specific security or asset. Cryptocurrencies are highly volatile and carry the risk of principal loss. All investment decisions and their outcomes are the sole responsibility of the investor.
About the Author — Dennis Kim
Dennis Kim is a quantitative analyst and AI researcher operating at the convergence of artificial intelligence and global financial markets. Since 2017, he has been deeply engaged in the blockchain industry, emerging as a key player connecting Korea and the broader Asian market—bridging ecosystems, capital, and technology across the region.
He served as CEO of Cyworld (Cyworld Z), steering one of Korea's most iconic social platforms, and built his foundation as a hands-on programmer with deep roots in the game security industry. Microsoft recognized his technical leadership with the Azure MVP award for nine consecutive years (2015–2023), and he remains an active cyber threat intelligence and security expert, publishing multilingual threat research read across the industry.
As a columnist, Dennis writes for both technical and general audiences, translating complex macroeconomic narratives and AI-driven signals into clear, actionable insight. Today, much of that work lives in his Vibe Investing repository, where he publishes deep-dive investment columns and develops AI-driven trading systems—turning the noise of markets and machine learning into a coherent investment edge.
His current focus sits squarely on the future he's spent his career preparing for: the fusion of AI and financial markets, where engineering rigor, security discipline, and market intuition meet.
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