Foundation slimming down for winter, L2 re-positioning, Vitalik's Ethereum "rebirth script"—a comprehensive plan to revitalize the network, enhance scalability, and ensure long-term sustainability.

Author: Jae, PANews

The price of Ether has recently been on a downward trend, but Ethereum co-founder Vitalik Buterin has been intensively signaling technological evolution and ecosystem development. By 2026, Vitalik sees this as the year for Ethereum to “regain lost ground.” In addition to technical efforts to reverse the centralization concerns caused by a decade of focusing on scalability, the ecosystem side sees the Ethereum Foundation launching a “fiscal slimming” plan. Vitalik himself will also donate over 16,000 ETH to promote an open-source, verifiable full-stack ecosystem. These series of actions are attempting to add more certainty to Ethereum’s future amid market volatility and fog. Bidding farewell to reckless spending, the Foundation initiates “Financial Slimming” Last week, Vitalik confirmed via tweet that the Ethereum Foundation (EF) is entering a phase of “moderate contraction.” On-chain analysis platform Arkham data shows that the Foundation currently holds about $392 million worth of ETH, while Vitalik personally holds about $517 million. Against the backdrop of ETH prices oscillating, the Foundation has decided to implement stricter financial discipline over the next five years. This decision is driven by dual pressures: on one hand, Ethereum needs to deliver on a tight roadmap to ensure its position as a high-performance, scalable “world computer”; on the other hand, the Foundation must ensure its sustainability over the long term to withstand market fluctuations and external challenges. However, fiscal tightening does not mean halting development or investment, but rather a “focus.” The Foundation’s role is shifting from an “ecosystem funder” to a “protocol guardian.” Resources will be directed more toward core protocol development, while some tasks previously considered “special projects” will be handed over to Vitalik personally. Vitalik emphasizes that Ethereum’s priorities are shifting from “pursuing mainstream adoption” to “providing tools for those who truly need them.” This will be a fight against “corporate waste (Corposlop).” The so-called enterprise-grade solutions often over-sacrifice decentralization for compliance or convenience, but in the new phase, Ethereum will prioritize tools that enable individuals and communities to achieve autonomy, security, and cooperation. This return to a “cyberpunk” spirit may lead Ethereum to reshape its long-term fundamentals. Recently, the Ethereum Foundation announced its funding status for Q4 2025, with funding decreasing from about $32.65 million in Q1 2025 to $7.38 million in Q4, focusing mainly on core areas such as protocol growth, developer tools, cryptography and zero-knowledge proofs, and consensus layer. This also reflects a shift from broad, indiscriminate ecosystem expansion to targeted, precise support, moving away from blind growth toward strengthening the security and stability of the underlying protocols. The Foundation’s strategic contraction is also a stress test for its organizational resilience. As bullish market capital flows retreat, whether the Ethereum ecosystem can survive based on intrinsic value and financial discipline is a question being written now. Notably, compared to Bitcoin’s controversial stance on quantum resistance, the Ethereum Foundation has demonstrated a stronger sense of urgency and action. Recently, the Foundation has assembled a dedicated post-quantum team, making this a top strategic priority for the Ethereum network. This move indicates a shift from background research to active engineering practice, building a stronger security shield for Ethereum. Donating 16,384 ETH to build full-stack hardware and software systems Contrasting sharply with the Foundation’s contraction is Vitalik’s aggressive personal investment. To fill potential funding gaps after the Foundation’s downsizing, Vitalik will take on responsibilities for “special projects” and has already transferred 16,384 ETH (about $45 million) from his personal address. He aims to develop an open-source, secure, verifiable full-stack hardware and software system to protect personal life and the public environment. According to OnchainLens monitoring, Vitalik has sold 1,441 ETH in the past two days, totaling $3.297 million, possibly for donation plans. Interestingly, the number 16,384 has strong symbolic significance—it is the genesis (initial) threshold for Ethereum’s beacon chain, perhaps representing Vitalik’s high expectations for Ethereum entering a new five-year development phase. Essentially, this is not just a simple fund transfer but a substantial investment in an open-source, verifiable full-stack ecosystem. Vitalik has previously discussed in his blog that the internet has become a major part of real life—driving finance, communication, and health in a digital age. However, if the underlying operating systems, processors, or compilers are closed “black boxes,” then even if the blockchain is decentralized, users still face risks like “Trojan horses.” Full-stack verification means users can verify from hardware instruction sets all the way to the terminal interface (UI). Ethereum aims to serve as a “trust anchor” in this goal. By decentralizing verification capabilities down to the endpoint, it eliminates users’ passive trust in centralized infrastructure providers. Therefore, Vitalik’s donation covers a broad range of applications beyond traditional blockchain scope, including hardware, communication, and even biotechnology:

• Open-source silicon chips (Vensa project): Aiming to promote the commercialization of open-source hardware, ensuring security applications no longer rely on closed, untrusted chip architectures.
• Advanced privacy solutions (ucritter): Supporting tech stacks that integrate zero-knowledge proofs (ZK), fully homomorphic encryption (FHE), and differential privacy.
• Encrypted communication and operating systems: Funding open-source encrypted communication apps, decentralized social media, and “local-first” operating systems to counteract surveillance by centralized platforms.
• Biotechnology: Supporting open-source vaccine tech and indoor air quality monitoring tools.

Vitalik’s donations will also establish a private funding system that complements the Foundation, further increasing the fault tolerance of the Ethereum ecosystem. Rebuilding the creator economy, proposing a creator prediction market At the application layer, Ethereum’s creator economy experiments are also entering deep waters. In the previous bull market, creator tokens (Creator Coins) were once highly anticipated, believed to solve platform exploitation of creators, but results were minimal. Vitalik bluntly states: In an era where AI can generate大量 content at low cost, simply increasing incentives will only lead to speculative bubbles. The real challenge is how to identify and amplify high-quality content. In other words, the fundamental pain point of the “creator token” model is not insufficient incentives but the lack of a “curation mechanism.” Currently, most creator tokens are caught in a “traffic—speculation” cycle: token prices reflect creator traffic rather than content depth. This often drives creators to produce content tailored to algorithms and short-term speculators, ultimately leading to ecosystem mediocrity. Additionally, since creator tokens are usually driven by speculators, their holder groups lack diversity and are vulnerable to manipulation by whales. Anyone with capital advantage can buy 51% of tokens to control governance, causing a serious disconnect between tokens and content quality. Using Substack as an example, Vitalik points out that it has established a reputation-based, subjective filtering subscription system. Although not decentralized, Substack demonstrates the value of “curation mechanisms” in content ecosystems. Inspired by Substack, Vitalik proposes establishing a “creator prediction market” system:

• Create DAO curators: Form small DAOs that are not aimed at issuing tokens but have strong curation ability, acting as gatekeepers to discover and endorse high-quality creators.
• Use tokens as prediction tools: Transform creator tokens into a prediction instrument—used to forecast whether a creator issuing tokens will be accepted by the DAO.

The value of creator tokens will be anchored through a buyback and burn mechanism after entering the DAO, linking token value to the creator’s professional recognition. This will also encourage speculators to become “predictors of potential creators,” guiding the game toward content quality itself. This strategic shift means Ethereum will no longer focus solely on “distribution of benefits” but on “defining value.” By integrating a “creator prediction market” system, Ethereum aims to build a content distribution layer closer to a knowledge market, curbing the spread of spam. Mainnet expansion squeezes survival space, Layer 2 scripts will rewrite the rules Looking back at development history, Ethereum’s scalability exploration has been an ongoing process of evolution and correction. As the core of Ethereum’s scaling narrative, Layer 2 (L2) now faces the most severe scrutiny. Recently, Vitalik wrote plainly: The original vision of L2 as “brand sharding” is no longer applicable unless L2 can achieve “extreme scalability” or provide innovative breakthroughs beyond scaling. This statement directly points to the current awkward situation of the L2 ecosystem. L2’s initial mission was to shoulder high-frequency computation and storage pressure for L1, reducing user gas costs. But the situation has changed dramatically:

• Mainnet performance leap: With significant increases in gas limits and the implementation of data sampling techniques like PeerDAS, Ethereum L1 itself is becoming an extremely powerful computation layer. When mainnet costs are low enough, mediocre L2 solutions will lose their reason for existence.

• Stagnation in L2 security advancement: Many L2s are slow in achieving fully decentralized verification (Stage 2). Some projects, due to regulatory compliance or technical inertia, prefer to stay at Stage 1, making them more like independent L1 bridges rather than extensions of Ethereum L2.

Vitalik believes that L2 should not just pursue “cheaper than L1,” but rather “doing what L1 cannot.” He lists several innovative directions for L2, which also set new survival rules:

• Non-EVM privacy-specific features/virtual machines: Providing native, easy-to-use privacy transaction environments, which are difficult for L1 to implement at scale.
• Functional differentiation: Focusing on features not available on mainnet, such as efficiency optimizations for specific applications, and new designs for AI, social, and identity beyond finance.
• Extreme performance: Offering “ultimate TPS” or “ultra-low latency” that even mainnet scaling cannot achieve.

Overall, the L2 market will shift from a “growth at all costs” expansion phase to a “focused innovation” competitive stage. During this process, mediocrity will be eliminated, and only the fittest will survive. Ethereum is transitioning from a “broad and comprehensive” expansion phase to a “precise and deep” focus phase. It no longer aims to be a “panacea solving all problems” but has clarified its positioning as “serving those who truly need it.” The Foundation’s fiscal tightening aims to build long-term sustainable capacity, while Vitalik’s personal investments aim to fill key gaps. The ecosystem and technological optimizations are pushing projects to shift from mere “arbitrage speculation” to genuine “functional innovation.” Although this transformation may involve some pain, it will also bring a more resilient open-source, verifiable full-stack ecosystem—perhaps the wisdom for Ethereum to survive the next five years.