As Ethereum continues to experience a prolonged price stagnation, market participants have shifted their focus from upcoming network upgrades to discussing the "problems" within the ecosystem. Despite ETH's staking share hitting record highs, the Ethereum Foundation (EF) has seen a significant exodus, with over eight leading developers leaving the project in just the past year.
In a new article, ForkLog examines the systemic crisis affecting the tokenomics, governance, and personnel of EF. It also seeks to answer how the conflict between the institutional vision of the second-largest cryptocurrency and Vitalik Buterin's uncompromising stance relates to the sales of ETH by early ICO investors.
Decentralization or Budget Crisis?
For the tenth consecutive month, Ethereum has shown weakness against Bitcoin. At the time of writing, the ETH/BTC pair has dropped to around 0.026 BTC. In dollar terms, the second-largest cryptocurrency is down 68% from its all-time high of $4,889, reached in August 2025, now sitting at approximately $1,600.
Daily chart of the ETH/USD pair on Binance. (June 11, 2026). Source: TradingView.
Amid declining short-term trading interest, the coin is increasingly viewed by long-term investors as a means to generate additional income. According to Dune, as of June 11, 2026, the amount of ETH locked in staking reached an all-time high of 39.51 million, accounting for 31.71% of the total supply.
Source: Dune/hildobby.
Ethereum is undergoing a deep identity and economic crisis: the shift of activity to Layer 2 networks has deprived the base blockchain of a significant portion of its fees. Amid price stagnation and growing investor disappointment, internal governance issues have also intensified.
One trigger for the current turbulence has been the unprecedented turnover within EF.
In November 2025, developer Peter Siladji left the project, stating that participants involved with EF were not adequately compensated for their efforts. Additionally, he believed that Vitalik Buterin unilaterally determines the direction of the ecosystem.
In 2026, a restructuring of the management team began. Tomasz Stanczak explained his decision as a desire to return to practical development, specifically in creating agent-based AI systems.
April brought operational losses, with both Josh Stark, a veteran with seven years of experience overseeing the Trillion Dollar Security initiative, and Trent Van Epps announcing their departures. Van Epps remained within the Protocol Guild ecosystem.
May's dynamics were particularly telling, as foundational consensus architects began to leave the organization. On May 19, 2026, Karl Bikhusen, a seven-year veteran who was instrumental in the creation of Beacon Chain, announced his departure. He diplomatically cited a desire to spend time with his newborn child, but the crypto community noted the context: he left alongside Julian Ma, who had worked for four years on the FOCIL project, responsible for protecting the network from censorship.
The simultaneous departure of specialists who held the fundamental architecture of the network served as a clear signal to the market about systemic discord within the team.
These personnel changes also reflect an ideological fracture. On March 13, 2026, EF published a policy document titled The Promise of Ethereum: Introducing the EF Mandate, which established four development priorities: censorship resistance, openness, privacy, and security. There are rumors that some employees were given an ultimatum: sign the document or leave.
Behind the scenes, the situation is attributed not only to generational shifts but also to financial pressures. To offset operational costs and avoid alarming the market with constant asset sales, the leadership took an unprecedented step. In March 2026, the Ethereum Foundation announced the transfer of the first 72,000 ETH to staking via the DVT-lite system.
Capitulation of Evangelists and the Death of the Deflationary Model
In 2026, analysts noted an accelerating pace of ETH transfers by ICO whales and large holders. In some cases, transactions were followed by systematic or accelerated asset sales:
- In April, one whale sold 11,552 ETH (approximately $23.4 million), using the proceeds in USDC on the Aave platform at a fixed interest rate;
- In the same month, an old address transferred 10,000 ETH (about $22.88 million) to a new account after nearly 11 years of inactivity. Analysts viewed this move as classic preparation for an over-the-counter deal or a gradual sale through market makers;
- In May, an address with an 11-year history withdrew over 12,000 ETH to the OKX exchange, utilizing a multi-sig architecture for smooth asset distribution;
- In mid-June, a participant from the Genesis block transferred 3,000 ETH to the Kraken exchange;
- At the end of the month, 2,000 ETH (over $4.2 million) left from a "sleeping" wallet after 10 years of inactivity.
Sales by investors who entered at $0.31 send a troubling signal to the market: the potential for explosive growth in ETH under the current macroeconomic uncertainty and pressure on the cryptocurrency market has been exhausted.
To understand why major ETH holders are exiting their positions, one must first grasp how Ethereum's primary technological success has turned into its economic problem.
The turning point came in March 2024 with the Dencun upgrade and the implementation of EIP-4844. The protocol provided rollups with a cheap way to publish data on L1 through BLOB transaction mechanisms, reducing costs by 10 to 100 times. Activity surged to Layer 2, while the base layer lost its main source of fee income. Following the next upgrade, Pectra, in May 2025, the average daily amount of burned coins fell to 3.26 ETH, losing 71% over the year.
The EIP-1559 mechanism, which formed the basis of the "ultrasound money" narrative, ceased to function effectively.
According to Token Terminal, in early 2025, daily revenue from network fees reached $40 million but then stagnated to a local peak of around $10 million in 2026.
Source: Token Terminal.
As a result, Ethereum has entered a zone of soft inflation. According to Ultrasound Money, at the time of writing, the annual growth rate of ETH supply was approximately 0.82%.
Source: Ultrasound Money.
In the face of evident problems, Vitalik Buterin did something investors least expected—he provided an intellectual justification for the situation. On February 3, 2026, he stated that the concept of rollups as "branded shards" of Ethereum "no longer makes sense." Essentially, the co-founder of the network abandoned the idea that the economic growth of rollups would automatically translate into the value of the base token. Instead, Buterin suggested viewing L2 as a broad "spectrum" of networks with varying degrees of attachment to Ethereum's security—from fully inherited to quite conditional.
For investors who built positions on the thesis that "the more L2, the more expensive ETH," this sounded like an official verdict.
A symbol of the broken narrative was the case of David Hoffman—co-founder of Bankless and arguably Ethereum's leading evangelist in recent years. On May 26, he published an essay titled Why I Sold My ETH, which quickly went viral.
According to him, the thesis "ETH is money" has generally been validated, just not to the extent its supporters had hoped:
"Ethereum technically won, but the market is no longer willing to aggressively revalue ETH as a monetary asset."
Hoffman pointed out the main contradiction: the network consciously chose the most challenging path—open ecosystems, decentralization, scaling through L2 solutions, and building infrastructure as a public good. He stated that this choice made Ethereum a foundation for stablecoins, DeFi, and RWA, but simultaneously allowed the primary economic value to leak away from the base token.
He added that he remains "extremely optimistic" about Ethereum as a technology and anticipates its future development.
Former EF researcher Dancrad Feist also expressed his views. He proposed creating a new organization to "save" Ethereum, which should receive initial funding of $1 billion. He also recommended forming a council of individuals who "want ETH to grow" and appointing a "competent leader who wants to fight."
On June 7, Ethereum co-founder and Consensys CEO Joseph Lubin, in an interview with CoinDesk, described the criticism of EF as a result of a misunderstanding of the foundation's role. He believes the organization should maintain neutrality towards the ecosystem and not combine protocol development with commercial objectives, asserting that the current reorganization is not a sign of crisis.
Zero-Sum Conflict
The personnel losses at the foundation, broken tokenomics, and the quiet exit of ICO whales can be interpreted as symptoms of different ailments. However, there is a unifying diagnosis that ties them together: Ethereum is governed by a person with a fundamentally different definition of "success" and understanding of the nature of money.
Criticism of Buterin as the focal point of all key decisions has been ongoing for years. Co-founder of Ethereum and Cardano, Charles Hoskinson, gave this criticism a specific form in September 2024, stating that blockchains must either remain eternally simple like Bitcoin or "choose a king." In his view, Ethereum made the latter choice.
"Everyone expects a roadmap and inspiration from him. He is the only person with enough power to unite people. If you remove him from the equation, what will the next hard fork look like, and how quickly can they implement it?"
To understand how fair these accusations of "dictatorship" are, one must grasp how decisions are made in Ethereum in practice. Formally, the process is open to all: any protocol change goes through the EIP mechanism. Final inclusion in an upgrade is agreed upon in regular coordination sessions, where representatives from all independent client teams reach technical consensus.
Buterin does not have veto power. However, his social media posts effectively determine which research directions become priorities. Support or criticism of a specific EIP sends a signal that development teams cannot ignore due to his authority and reasoned arguments.
The most illustrative example of how this power operates in reality—and simultaneously the sharpest point of conflict with institutional capital—is the story of FOCIL. In February, during one of the last meetings led by Alex Stokes, the FOCIL mechanism was officially included in the upcoming Hegota upgrade, scheduled for the second half of 2026. EIP-7805 mandates validators to include all valid transactions in blocks—including those involving addresses under OFAC sanctions. If a proposed block ignores them, the chain automatically forks away. For cryptocurrency exchanges seeking regulatory compliance and institutional validators, this poses a direct challenge. Buterin, in response to criticism, stated that he is building "Ethereum on cypherpunk principles, without compromises."
This moment exposes the main ideological conflict. Venture funds and institutional capital focus on quarterly metrics: token price, burn volume, and L1 competitiveness in TPS. Buterin thinks in a different register, where the price of ETH is a side effect, and the goal is to create good as such.
Understanding the issues surrounding Ethereum requires accepting that Buterin's mindset is a constant he will not sacrifice for the volatility of economic processes, even at the expense of the cryptocurrency's value.
This unpopular position is aimed at an audience, but it is the cornerstone without which the second-largest cryptocurrency would not exist.
The resolution of this conflict does not imply a winner in the classical sense. At this stage, Ethereum cannot satisfy both sides simultaneously: the network's architecture, designed for neutrality and censorship resistance, is structurally incompatible with the demands of institutional capital. This is not a management failure but a conscious choice made once and consistently defended since.
The outflow of retail capital and profit-taking by whales is the price the ecosystem pays for attempting to build a settlement layer capable of outliving its creators.