The Ethereum Foundation cut roughly one-fifth of its workforce and slashed its budget by 40 percent in 2026 — but the organizations spinning out of the chaos could end up being more useful for creators and collectors than the foundation ever was.
By Imani Davis | July 15, 2026
The Hook
The Ethereum Foundation entered 2026 under mounting pressure from developers, investors, and community members who argued the organization had become too slow, too focused on layer-2 scaling, and out of touch with the ecosystem it was supposed to serve. By mid-year, the organization had undergone one of the largest restructurings in its 12-year history.
The numbers are stark. Co-executive director Tomasz Stanczak stepped down in February. Co-executive director Hsiao-Wei Wang resigned in June. Nine senior leaders, researchers, and executives left the organization. The foundation cut roughly 54 positions — about one-fifth of its workforce — and reduced its annual operating budget by approximately 40 percent as part of a plan to become leaner and more financially sustainable, according to CoinDesk reporting.
But the most interesting part of the story is not what was dismantled. It is what was built in its place.
On-Chain Evidence: The Spinouts
Three new organizations have emerged from the Ethereum Foundation’s restructuring, each taking on responsibilities that previously lived inside the foundation:
- EthLabs — A nonprofit focused on accelerating protocol research and ecosystem coordination, backed by several of the ecosystem’s largest ETH treasury companies. Think of it as a research lab that sits outside the foundation’s bureaucracy.
- Ethereum Institutional — A separate nonprofit designed to coordinate adoption among enterprises, asset managers, and nonprofits. Its job is to help traditional financial firms actually use Ethereum.
- EthSystems — A for-profit startup launched by former foundation researchers, focused on building privacy infrastructure for banks and institutions using Ethereum.
EthSystems is the most intriguing of the three. The company emerged from the foundation’s Institutional Privacy Task Force, which spent the past year developing privacy technologies for enterprise use cases while engaging with central banks, regulators, global banks, and asset managers. Its plan is to commercialize that work — confidential stablecoin transfers, private bond issuance, cross-chain settlement systems, and open-source protocol specifications.
“Commercial engagements need a commercial counterparty,” the company said in a post on X. “The model is simple: we continue the work we’ve been doing, only now we charge for it.”
EthSystems is backed by BitMine, SharpLink, Ethereum co-founder Joseph Lubin, SNZ, and other Ethereum-focused investors.
The Core Conflict: Why Privacy Matters for Digital Collectibles
You might wonder what bank privacy technology has to do with NFTs and digital collectibles. The answer is: more than you think.
One of the biggest complaints from NFT creators and collectors since the beginning has been the total transparency of public blockchains. Every purchase, every sale, every wallet balance — it is all visible to anyone with a block explorer. For artists selling digital collectibles, that means their buyers’ financial activity is public. For institutions exploring tokenized art programs or branded digital assets, that means their treasury movements are exposed.
EthSystems argues that confidentiality is one of the key barriers preventing banks and asset managers from moving real-world financial flows onto Ethereum. The same logic applies to digital collectibles. If a major brand wants to launch an NFT collection — whether for loyalty rewards, digital merchandise, or ticketing — the ability to transact privately matters. Nobody wants their customers’ purchase history publicly indexed.
The company said its approach will focus on modular privacy systems that allow participants to selectively disclose transaction information while maintaining Ethereum’s security guarantees. That technology could eventually filter down to the NFT ecosystem, giving creators and collectors tools to protect their activity on-chain.
Market Implications: What This Means for the NFT Ecosystem
The Ethereum Foundation’s restructuring reflects a broader shift in how the Ethereum ecosystem operates. Instead of one central organization trying to do everything — protocol research, developer tools, institutional partnerships, privacy technology — the work is being distributed across specialized entities that can move faster and focus on specific problems.
For NFT creators and platforms, that could mean better developer tools, faster protocol improvements, and eventually more sophisticated privacy options. The foundation’s new mandate, built around the CROPS framework — censorship resistance, resilience, openness, privacy, and security — explicitly includes privacy as a core pillar. That is a shift from the foundation’s previous posture, which treated privacy as a secondary concern.
The remaining foundation staff were reorganized into five core operating groups focused on areas the foundation said only it was uniquely positioned to support. That narrower focus could paradoxically make the foundation more effective at the things that matter most to the ecosystem — including the base-layer improvements that NFT platforms depend on.
The Verdict: Less Control, More Innovation
The Ethereum Foundation’s 2026 shakeup looks dramatic from the outside — budget cuts, leadership departures, staff reductions. But the organizations emerging from the restructuring suggest that the ecosystem is maturing in a healthy way. Instead of depending on a single institution, the work is being distributed across entities with different structures, funding models, and incentives.
EthSystems, as a for-profit company, will have to build products that customers actually want to pay for. EthLabs, as a nonprofit backed by ETH holders, will have to deliver research that benefits the ecosystem. Ethereum Institutional will have to help traditional firms adopt the technology. Each organization has a clear mandate and a clear accountability mechanism.
For anyone building in the NFT and digital collectibles space, the spinouts represent new potential partners, new tools, and new infrastructure. The privacy technology that EthSystems is developing for banks could eventually give NFT marketplaces the option to offer private transactions. The protocol research from EthLabs could lead to base-layer improvements that make minting and trading digital collectibles cheaper and faster.
The message from the Ethereum Foundation’s restructuring is clear: the future of Ethereum will not be built by one organization. It will be built by many — and that is probably how it should have been all along.
The cryptocurrency market remains highly volatile. This article is for informational purposes only and does not constitute financial advice.
40 percent budget cut while sitting on billions in ETH. either they finally listened to the community or vitalik saw something that spooked him
40 percent budget cut is not a restructure, thats a retreat. vitalik better have a plan
the spinouts doing privacy work is honestly the best outcome. EF was too bloated to ship anything useful anyway
margit hard disagree. you need a strong central org to coordinate protocol upgrades. this fragmentation could kill alignment on Pectra follow-ups
imagine any other $300B project losing a fifth of its team and going “this is fine”
the privacy spinouts are the real story here. EthSystems picking up ZK work that EF sat on for years. sometimes the best thing a bloated org can do is let people leave and actually build
spinout_watcher EthSystems picking up ZK privacy work is the actual story. EF had years and shipped nothing usable. the spinouts will outcompete the parent
the spinouts doing actual privacy work is the only positive here. EF spent years hiring researchers who published papers while EthSystems ships code
cutting 20 percent of staff and 40 percent of budget because the community said you are too slow is brutal but honestly probably needed. ef was burning money on stuff nobody asked for
imagine being told your layer 2 focus was wrong after years of pushing rollups as the answer. vitalik must be having interesting thoughts rn
protocol_brat cutting staff because community said you are too slow is the most web3 thing ever. imagine a Fortune 500 doing that
the spinouts doing privacy work is the interesting part here. EthSystems picking up where EF dropped the ball on actual usable tech
40 percent budget cut at an org sitting on how much eth? something does not add up unless they are planning something with that treasury
EF cutting 20 percent of staff while sitting on hundreds of thousands of ETH is not a budget issue. thats a strategic pivot disguised as austerity
Dmitri K. 40% budget cut while sitting on hundreds of thousands of ETH. either they know something about price action or the treasury is being redirected quietly
disagree on needing central coordination. ethereum survived the merge, shapella, and pectra upgrades fine. the foundation is cargo cult at this point