Core members leave to establish "Shanzhai EF," how much longer can the Ethereum Foundation hold on?

Author: Kaori, Penny, BlockBeats

On January 21, Ethereum's prominent core developer Eric Conner announced on social media that he was stepping down from the Ethereum Foundation, citing a series of issues including lack of transparency, disconnection from the community, and resistance to change within the foundation.

The criticism of the Ethereum Foundation (EF) has been ongoing for a long time. In recent months, the weak performance of Ethereum has further fueled dissatisfaction within the community. Many well-known investors and developers have expressed their opinions and grievances about the EF. However, the departure of a veteran developer indicates that the internal divisions within the EF have reached an irreconcilable point, pushing the EF into the spotlight.

As public opinion continues to escalate and community anger remains unresolved, a grassroots initiative has quietly established the Second Foundation.

Ethereum is facing both internal and external challenges and urgently needs reform.

Who is Eric?

Eric Conner, a well-known core developer of Ethereum, left the ecosystem community after nearly 11 years of collaboration with Ethereum, citing Vitalik's rejection of a leadership restructuring proposal.

Eric is a co-author of EIP-1559, a significant network change that altered the way Ethereum transaction fees operate. He has never been formally employed by Ethereum but has consistently provided consulting, investment, and has been one of the leaders in the ecosystem's development since its early days.

On January 21, Ethereum core developer Eric Conner posted on social media, "I am no longer '.eth'. Perhaps one day, those in leadership roles will realign with the community, but for now, I am stepping away. Deep down, I sincerely hope Ethereum succeeds. Good luck."

He later posted about why he joined Ethereum and why he chose to leave. Eric first encountered Bitcoin in 2012, and after witnessing the Mt. Gox incident, he saw many friends suffer heavy losses due to reliance on centralized exchanges. Eric and a few friends attempted to develop the first decentralized exchange (DEX) on Ethereum—EtherEx. Although the project failed due to untimely circumstances, it helped him integrate into the Ethereum community.

Previously, Eric had stated that the EF's lack of transparency and disconnection from the community had become increasingly pronounced. The foundation could have cut its budget by 80%, allowing Ethereum to operate and develop normally. The problem is that the current foundation does not report to stakeholders, is gradually sinking into a quagmire, and is resisting change. The foundation currently exhibits an "anti-victory and competitive mindset," leading many community members to question whether to continue staying.

Rome wasn't built in a day

Since last year's Black Mountain EDCON, dissatisfaction with the Ethereum Foundation has begun to manifest. Layer 2, as a solution to enhance Ethereum's scalability, has been shackled with the "Ethereum alignment" label from day one, accepting and executing the EF's directives. Everyone is pledging loyalty to Ethereum, aiming to be the most EVM-compatible Layer 2, which has led project teams to focus more on gaining EF's recognition than on the products and technologies themselves, causing the Ethereum ecosystem to begin to deform under EF's pressure.

The EF's complex internal relationships and its ideological constraints on project "orthodoxy," combined with major protocols gradually fleeing Ethereum and being backstabbed, suggest that this organization seems to be entering a mid-life crisis, struggling with structure, efficiency, and culture. With the meme trend driving Solana's resurgence, Ethereum's weak performance during several Bitcoin breakthroughs, and Trump's recent issuance of tokens on Solana pushing SOL to new highs, Ethereum's decline has become evident, leading to escalating dissatisfaction within the community. Under public pressure, on the 18th, Vitalik himself responded directly to the criticisms, stating that a large-scale reform of the EF's leadership structure is underway, along with specific goals for the changes.

A stone stirred up a thousand waves, and a campaign against the EF followed.

On the 20th, Kain Warwick, founder of Synthetix and Infinex, was the first to express dissatisfaction with Layer 2: "If I were to run the EF, I would definitely pressure Layer 2 to use sequencer revenue to burn ETH. Ethereum has a significant advantage in this negotiation…"

At the same time, Aave founder Stani Kulechov stated that after reading the Ethereum 2024 budget report, he identified 12 areas for improvement to ensure the EF's sustainable development, including slowing down spending, reducing staff numbers, and establishing a sustainable revenue model. However, on the 21st, Stani Kulechov posted again, stating, "I do not advocate for the dissolution of the EF, but rather for a better, faster, stronger, and broader EF path… We should focus less on internal politics or neutrality and more on advancing technological progress as quickly as possible."

That evening, Evgeny Gaevoy, founder and CEO of the top market-making firm Wintermute, also expressed his views on Ethereum, mentioning that Ethereum is currently at risk of falling into a "death spiral": "If there are no casinos, the only use for ETH is to send things in Zazulu, then the price will be very low, and security will also be very low. As the price of ETH falls, fewer and fewer dapps will consider it secure and will flee to other chains, which could create a very (deadly) spiral, further lowering the price."

In the face of the community's sudden outburst, the EF clearly was not prepared with a comprehensive strategy to quell the anger, even going against the tide by selling ETH in response to the community's staking suggestions. The next day, Vitalik announced an Ethereum Foundation financial update, stating that the EF had established a new 3-of-5 multi-signature wallet, which would be used to participate in the DeFi ecosystem, and that test transactions had already been conducted on Aave.

However, the community seemed unimpressed, mocking them with "Are you preparing to sell again?" The EF's campaign against the community's anger has not yet subsided, and the smoke of conflict still lingers.

Even the Second Foundation has emerged, left or right?

On January 22, rumors circulated that Lido founder Konstantin Lomashuk had established the Second Foundation for Ethereum. Currently, the official Twitter account of the Second Foundation (@2ndfoundation) has been launched, and Konstantin Lomashuk has promptly retweeted its first post.

On January 23, Lido founder Konstantin Lomashuk posted again, stating that this tweet was just an idea and that there is currently no real establishment of a "Second Foundation."

He stated that Ethereum is the ultimate world computer, and every member of the Ethereum community can contribute to its growth, development, and success. If a Second Foundation is indeed established in the future, it must have a clear goal to complement the significant work done by current contributors. "Thank you all for your support; I also believe Ethereum needs more organizations to jointly promote development. I will share more ideas after further discussions with those who contact me."

Although this plan has not yet been truly executed, combined with Eric Conner's departure, the community has sparked intense debates about the internal and external challenges facing Ethereum.

Regardless of how the domestic and international communities debate, one consensus is that the Ethereum Foundation needs to make a choice, as the distinction between left and right inherently exists. One cannot be both leftist and rightist. In times of industry difficulty, leftist idealism is needed, while rightist accelerationism is required during industry development. One netizen commented, "If Ethereum takes the route of network nation-building, political diversity will inevitably exist. If multiple foundations can ensure both competition and cooperation, it will guide Ethereum toward a greater future."

The Second Foundation currently appears to be a disruptor, but others argue why not expect more decentralized organizations to share control and power, just as Vitalik stated in an article on January 21 that the future of the Ethereum blockchain is decentralized, and the Ethereum Foundation is just one part of it. He further pointed out: "The EF should not 'over-intervene'; it should confidently represent the part of Ethereum that it can effectively represent while consciously creating and nurturing open spaces for other organizations to represent other aspects of Ethereum. Some of these aspects may even be more suited to exist in a profit-oriented form."