During this market cycle, Ethereum’s performance has fallen short of expectations. As the leader among altcoins, Ethereum has not only remained sluggish despite Bitcoin reaching

new all-time highs but also faces stagnation in ecosystem development—lacking new narratives, losing momentum to competitors like Solana, and dealing with controversies like Layer 2 “ghost chains.”

As these issues continue escalating, community dissatisfaction has intensified, making the Ethereum Foundation (EF) the target of criticism. Several core developers’ departure and public criticism of EF have further reinforced perceptions of internal mismanagement. In response, EF has finally taken action: following a statement from co-founder Vitalik Buterin announcing “a major restructuring of EF leadership,” the foundation has launched a series of initiatives, including allocating 50,000 ETH from its treasury to support the DeFi ecosystem and hiring social media managers to improve communication with the community.

This article will provide an in-depth analysis of the Ethereum Foundation’s current state, focusing on its role, participation in the ecosystem, organizational structure, fund utilization, and controversies surrounding ETH sell-offs. Additionally, it will explore the broader challenges Ethereum is currently facing.

Key Controversies: Inefficiency, Selling ETH, and Lack of Transparency

Since its establishment in 2014, the Ethereum Foundation has played an irreplaceable role in developing the Ethereum ecosystem. However, in recent years, its market reputation has steadily declined due to issues such as an unapproachable leadership team, internal inefficiencies, and a lack of financial transparency. Of particular concern is EF’s periodic selling of ETH, which has unsettled token holders, many of whom believe EF’s actions directly contribute to price declines. The following sections provide a deeper analysis.

Lack of Transparency

EEF’s transparency issues primarily revolve around treasury expenditures and internal decision-making.

On the treasury side, while EF has gradually begun disclosing some funding details—such as quarterly Ecosystem Support Program (ESP) grants and annual spending summaries for different initiatives—the level of disclosure remains insufficient.

Source: esp.ethereum.foundation

For instance, the ESP program, designed to fund ecosystem projects through grants and other support, sponsored 397 projects in 2022 with total expenditures of $30 million. In 2023, it increased to 498 projects with a total of $61.1 million. Since its inception in 2014, the program has spent a cumulative $44.39 million across various domains, including community engagement, education, consensus layer development, zero-knowledge proofs, and developer tools. However, EF has only disclosed the names of sponsored projects without revealing the exact grant amounts or providing follow-up updates on project progress.

Regarding internal decision-making, EF’s transparency is similarly questionable. Taking project funding as an example, EF has yet to publish clear selection criteria or detailed funding guidelines. This reliance on a small group of decision-makers for subjective evaluations raises concerns about unfair resource allocation and missed opportunities for high-potential projects.

Inefficiency in Execution and Fund Utilization

In mid-January, early Ethereum developer Eric (@econoar) announced his departure from EF, criticizing the foundation’s cumbersome processes, which require excessive time and effort, as well as its leadership’s disconnect from the broader community.。

According to EF’s 2024 annual report, the foundation consists of over 20 independent teams, including the Robust Incentives Group (RIG), Geth, the Applied Research Group (ARG), and the Consensus R&D team, each focusing on different research areas. However, EF has not disclosed the internal structures or operational workflows of these teams. This loosely organized community model inevitably leads to inefficiencies compared to a corporate structure.

Furthermore, EF’s massive expenditures have also drawn criticism. Reports show that EF’s annual spending was $105 million in 2022, increasing to $134 million in 2023. Internal expenses rose from 36.2% to 37.2% of the total budget, adding $12 million, while external spending increased by $17.5 million. Although most of these funds were allocated to community development, project funding, and technical research, the scale of expenditures has exceeded community expectations.

Source: ethereum.foundation

Due to this, many within the community have called for EF to significantly reduce its budget. Aave founder Stani Kulechov has suggested improvements such as slowing spending, reducing staff, and establishing a sustainable revenue model. Meanwhile, Ethereum founding member Anthony D’Onofrio has emphasized the need for financial accountability to ensure measurable outcomes from EF’s expenditures.

ETH Sell-Off Controversy

Due to blockchain transparency, EF’s on-chain transactions are highly visible. For a long time, the foundation’s ETH sales have been viewed as a signal for market tops, earning EF the nickname “master of selling at the peak.”

However, an analysis of EF’s historical sell-offs compared to ETH price trends suggests that EF’s supposed ability to “time the market” is likely coincidental rather than a reliable indicator of market tops. While large EF sell-offs often create short-term market volatility, they are not necessarily the decisive factor behind sustained ETH price declines.

EF has justified its periodic ETH sales by stating that they are necessary to ensure long-term operations and maintain sufficient fiat reserves to cover expenses during bear markets.

Source: intel.arkm.com

As of February 23, 2025, EF holds approximately $681 million in cryptocurrency in its treasury, with 99.98% in ETH—equivalent to about 0.2% of total ETH supply. Additionally, EF has $180 million in non-crypto investments and assets.

In fact, addressing these controversies is far more complex than it appears. They stem from deeper structural issues such as EF’s ambiguous organizational model, unclear role definition, conflicts between long-term vision and short-term realities, and broader challenges facing the Ethereum ecosystem. Resolving these problems requires internal EF reforms and the collective efforts of the Ethereum community.

Company-Like Entity vs. Community Organization

EF exhibits a unique paradox in its operational model. Since its establishment in 2014, it has been committed to decentralization, asserting that it is neither a company nor a traditional nonprofit organization. However, in practice, EF operates more like a centralized entity, with a structured hierarchy that includes management, team leaders, researchers, developers, and community members. A small group of decision-makers holds absolute control over treasury funds, ecosystem resources, and development direction.

This ambiguous structure has unsettled some community members. Many believe that a corporate model would yield higher efficiency and economic benefits, while a loosely organized community structure lacks accountability and impairs long-term sustainability. The lack of broad community approval for key decision-makers has also exacerbated trust issues.

Aya Miyaguchi, the current executive director of EF, previously led Kraken’s operations in Japan. Since assuming her position in 2018, she has faced immense pressure from the community, with continuous calls for her resignation and even extreme statements such as “Kill Aya.”

In response, Vitalik Buterin publicly condemned such remarks, calling them “pure evil.” He also made it clear that “I am the sole decision-maker when it comes to the Ethereum Foundation’s leadership team.” Additionally, he stated, “You are actively reducing my interest in doing what you want.”

These seemingly authoritarian remarks have once again sparked widespread controversy within the community. As Ethereum’s co-founder and spiritual leader, Vitalik’s words and actions are seen as a guiding force by community members. While he strongly advocates for decentralized governance and has emphasized that “if Ethereum becomes a company, it will lose most of its meaning,” the absence of a clear governance framework and regulations means that this chaotic yet centralized decision-making approach is likely to persist for the foreseeable future.

Long-Term Vision vs. Short-to-Medium-Term Goals

EF positions itself as a coordinator of the Ethereum ecosystem, allocating resources to support key projects and fostering their development into core pillars of the ecosystem. At the same time, EF actively promotes Ethereum externally and strives for large-scale adoption, with the ultimate goal of realizing Ethereum as the “world’s ultimate computer.”

As part of this vision, EF adheres to three core values: long-term thinking, minimalism, and value management. This perspective also explains why EF prioritizes technological iteration and social value over short-term economic gains or conventional measures of success and power accumulation.

However, this idealistic long-term vision has created a significant disconnect from immediate market demands. Solana co-founder Anatoly Yakovenko has pointed out that Ethereum’s biggest challenge lies in the long-term uncertainty of Data Availability (DA) and the unclear prospects of ETH as “ultrasound money.”

Moreover, in an effort to uphold its long-term vision, EF has consistently maintained neutrality in technical, political, and governance matters. While this strategy has helped it avoid unnecessary controversies, it has also led to missed opportunities to secure resources and first-mover advantages. In times of crisis within the Ethereum ecosystem, EF may need to step out from behind the scenes and take a more proactive role—while staying true to Ethereum’s core principles—to guide and drive the ecosystem’s progress.

Reform Goals and Measures

In response to the controversies surrounding EF, Vitalik Buterin has outlined a series of large-scale reforms aimed at achieving the following objectives:

Source: @VitalikButerin

• Enhancing the technical expertise of EF’s leadership team.
• Improving two-way communication between EF leadership and ecosystem participants, including new and existing stakeholders such as individual and institutional users, application developers, wallet providers, and Layer 2 (L2) solutions.
• Recruiting new talent to increase execution capability and efficiency.
• Actively supporting application developers while ensuring that fundamental values and inalienable rights—particularly privacy, open-source principles, and resistance to censorship—are upheld at the application layer.
• Expanding decentralization, privacy technologies, and Ethereum’s on-chain usage, including applications in payments and asset management.

At the same time, he also made it clear that certain principles would remain unchanged. These include: there will be no ideological shift; EF will not actively lobby regulatory agencies or influential political figures, especially in the United States, but also in any major country at the risk of compromising Ethereum’s status as a globally neutral platform; EF will not become a battleground for vested interests; nor will it evolve into a highly centralized organization or position itself as the “main player” of Ethereum.

In addition to these strategic shifts, EF has already begun implementing changes. Recent updates indicate that EF is hiring social media managers and community engagement personnel to strengthen its direct participation in the ecosystem. Additionally, EF has allocated 50,000 ETH from its treasury to support the DeFi ecosystem. In mid-February, it deployed 10,000 ETH to Spark, 10,000 ETH to Aave Prime, 20,800 ETH to Aave Core, and 4,200 ETH to Compound, with further staking initiatives under consideration.

Notably, Vitalik and EF have also invested in a company called Etherealize, which aims to promote Ethereum adoption on Wall Street. Reports indicate that Danny Ryan, a former EF researcher who resigned in September last year, has joined Etherealize as a co-founder. These developments highlight Vitalik and EF’s determination to break out of the current challenges, but whether the market will respond favorably remains uncertain.

Challenges Facing by Ethereum

While EF’s controversies may temporarily subside, they have largely served as an outlet for community frustration over ETH’s stagnant price and the ecosystem’s slow progress. The real issue that requires urgent solutions is Ethereum itself.

Weak Narrative

Ethereum’s ecosystem has reached a bottleneck, with key on-chain metrics—such as gas fees, active addresses, and daily transaction counts—showing little significant growth over the past year. While narratives like the Dencun upgrade, spot ETF approvals, and restaking have been highly anticipated, market reactions have been lukewarm. For example, as of February 21, 2025, U.S. Bitcoin spot ETFs had recorded cumulative net inflows of $39.56 billion, whereas Ethereum spot ETFs had only attracted $3.15 billion—a stark contrast.

According to Ethereum’s roadmap, the next major milestone is the Pectra upgrade, scheduled for April 8. As one of the most extensive upgrades in Ethereum’s history, Pectra will include up to 20 Ethereum Improvement Proposals (EIPs) aimed at enhancing user experience, increasing L2 block capacity, and improving scalability.

Competition from Solana and Other Public Chains

The rise of Solana, SUI, and other competing public blockchains poses a significant threat to Ethereum. Solana, in particular, has dominated the MEMECOIN frenzy, leveraging its fast transactions and low fees to achieve record-breaking token price surges. Additionally, the rapid growth of the Solana Virtual Machine (SVM) ecosystem has further strengthened its network effect.

While some Ethereum supporters argue that Solana’s popularity is unlikely to translate into a sustainable user base and that its ecosystem still lags behind Ethereum, there is no denying that Solana’s strong performance has significantly impacted Ethereum’s liquidity and user base.

Layer 2 (L2) Challenges

Ethereum’s scaling strategy has centered around Layer 2 solutions, which have received strong backing from EF and ecosystem participants in recent years. These L2 networks have successfully reduced transaction costs and increased network capacity. However, the rapid proliferation of L2 solutions has far exceeded market demand, leading to excessive fragmentation within the Ethereum ecosystem. Users and liquidity have been scattered across different L2s, severely impacting the overall user experience.

More critically, the relationship between Ethereum’s Layer 1 (L1) and its L2 networks has become imbalanced. While L1 continues to “supply blood” to L2 solutions, L2s have not provided the expected value back to L1. They have neither generated stable long-term revenue for Ethereum nor strengthened the demand for ETH as the core asset of the ecosystem, as their independent token incentive models have weakened reliance on ETH.

In response, Synthetix founder Kain Warwick has called for EF to require L2 solutions to use their revenue to buy back ETH, increasing its demand and supporting its value. Curve founder Michael Egorov has taken a more radical stance, suggesting that EF should abandon the L2 strategy altogether. Even Vitalik Buterin has publicly urged L2 projects to give back to L1 by adopting measures that reinforce ETH as the foundational asset of the Ethereum economic system.

Summary

Facing internal and external challenges, the Ethereum Foundation (EF) is seeking to revitalize itself through a series of reforms, including enhancing the technical expertise of its leadership, strengthening community engagement, optimizing execution efficiency, and focusing on application-layer development. However, EF is only one part of the Ethereum ecosystem and cannot bear the responsibility of ecosystem revival alone.

The collective effort of all ecosystem participants is essential for Ethereum to overcome its current difficulties. Only through coordinated advancements in technology, governance, and ecosystem development can Ethereum regain its competitive edge and reclaim its position at the forefront of the blockchain industry.