The Ethereum Foundation is publicly criticized by insiders: Where are the challenges in EF governance?

Source: Galaxy; Compiled by Golden Finance

On October 17, Ethereum senior researcher Dankrad Feist announced that he would join Tempo, a Layer-1 chain focused on payments developed by Paradigm. Dankrad has been working full-time at the Ethereum Foundation since 2019 (in the cryptocurrency space, six years is like a lifetime). This spring, he played an important role in the scalability debate of Ethereum and contributed to PeerDAS ( EIP-7594 ), which is a key component of Ethereum's scalability plan through Layer-2.

Feist's exit has triggered a new round of reflection and criticism regarding EF and its leadership, the venture capital (VC) investors in the Ethereum ecosystem, and the entire Ethereum community. Three core communication speakers around these points are Péter Szilágyi (former head of the Geth client), Sandeep Nailwal (founder and CEO of the Polygon Foundation), and Joseph Lubin (co-founder of Ethereum and founder of Consensys).

Szilágyi's remarks are particularly significant as he publicly disclosed a private letter he sent to the leadership of the Ethereum Foundation in May 2024. The letter has a sharp tone and harshly criticizes the leadership of the Ethereum Foundation, its treatment of employees, and the “cabal” manipulating the direction of Ethereum. Szilágyi first detailed the vast disparity in compensation between Ethereum Foundation contributors and what he calls the ecosystem's “high rollers.” He revealed that during the first six years of his full-time work on Geth (the most commonly used Ethereum execution client), his total pre-tax income was $625,000, with no bonuses, even as Ethereum's market cap grew from zero to $450 billion. He believes the Foundation's long-standing low compensation for its most loyal contributors has fostered improper incentives, forcing technically gifted but underpaid developers to seek external consulting or advisory roles for financial stability. In his words, “the Foundation has set the protocol up to be self-entrapment by making financial dependence on external entities necessary.” He also criticized the Foundation's internal culture, stating that there is a significant discrepancy between its public image and private reality. The Foundation officially portrays him as a respected leader and spokesperson for client diversity work. He claims that privately, he is seen as a nuisance, tolerated only when convenient. He asserts that Feist privately described Szilágyi's position as merely “a recognized leadership role,” which the developer feels is an apt description: praised in public, but coldly treated in private. He describes himself as a “useful fool,” used to showcase the Foundation's openness to internal dissent, while gradually being marginalized in private. He says that every time he publicly opposes “power players,” his credibility is undermined, and every act of conscience turns into a loss of reputation.

In addition to compensation and governance, Szilágyi also claims that Ethereum has quietly formed a deeply rooted social hierarchy. He asserts that success in the ecosystem is less about individual capability and more about the proximity to a small network consisting of about “five to ten well-known researchers and investors” and “one to three venture funds” that support them. Szilágyi states that members of this group are often closely connected to Ethereum founder Vitalik Buterin, effectively acting as gatekeepers who decide which projects can gain legitimacy, visibility, or funding. He believes that “while Ethereum is decentralized, Vitalik absolutely has complete indirect control over it”, as his endorsement (direct or indirect) still determines which projects can thrive. In Szilágyi's view, the once-permissive culture of Ethereum, which prided itself on permissionless innovation, has now devolved into a “ruling elite” made up of friends, researchers, and investors, whose alliance with Vitalik determines the success of projects.

In summary, Szilágyi warned that the structural flaws of the foundation have turned Ethereum into a fertile ground for protocol capture. He stated that on one hand, the organization fails to provide meaningful compensation for internal talent, while on the other hand, it tolerates the advisory entanglements between Ethereum Foundation researchers and venture capital projects, which effectively hands over influence to external financial participants. In his words, what started as an open-source idealistic movement has now become a place where “we set out to build a great cause, but once (enough) money is in place, we will unhesitatingly abandon all principles.” For him, this dynamic represents a moral decay of Ethereum, as its original mission of open participation and decentralization is being replaced by financial and political incentives controlled by a small number of insiders. Szilágyi concluded, “So, where does all this lead us? I really don’t know. Can Ethereum be fixed? No, it really can’t.”

Nailwal of Polygon expressed the same frustration as Szilágyi, stating that reading this letter made him “begin to question his loyalty to Ethereum.” He expressed deep respect for Vitalik but also lamented the negligence of the Ethereum Foundation over the years and the hostility of some community members who have “maliciously attacked projects like Polygon,” despite the contributions Polygon has made. Nailwal believes that the culture of Ethereum has become extremely exclusive, as it refuses to acknowledge Polygon as a legitimate Layer-2 platform and denies it the market-recognized status of “Ethereum Testnet,” while Polygon's ecosystem is still anchored on Ethereum. He stated that this dynamic has become so distorted that people are beginning to question his fiduciary responsibility to Polygon, claiming that if Polygon were to brand itself as a Layer-1 platform, its value could be “two to five times higher.” Nevertheless, he still mentioned that he would “make one last effort” to urge the community to reflect on why so many major contributors are questioning their loyalty to Ethereum now.

Six hours after Nailwal's post, Vitalik published another post expressing gratitude for the contributions made by the CEO of Polygon to the ecosystem. He also acknowledged the importance of Polygon in creating Polymarket, stating in Vitalik's words, “Polymarket might be the most successful example of 'not just boring financial applications'; it has indeed succeeded and provided value.”

Joe Lubin, the founder of ConsenSys and one of the original architects of Ethereum, made a mild defense of the project and its developmental direction. He acknowledged that “the goal of Paradigm and many other venture capital firms is to extract as much value as possible from Ethereum and the broader ecosystem, while also creating value for the ecosystem to maximize their own returns,” and that “Paradigm is particularly good at this,” but he also believes that such behavior is “natural and inevitable.” Lubin views the involvement of venture capital as a necessary bridge for global capital entering decentralized markets, expressing hope that future on-chain investment platforms will eventually replace them. While he admits he would prefer Feist and other researchers to stay within Ethereum, he describes their departure as part of a healthy development cycle rather than a crisis. His remarks stand in sharp contrast to those of Szilágyi and Nailwal, emphasizing long-term inevitability and pragmatic acceptance rather than moral outrage.

Feist is one of the notable figures who left the Ethereum Foundation and its ecosystem in recent years. Notably, Danny Ryan left the foundation to found Etherealize, Barnabé Monnot left the Ethereum Foundation to establish Defipunk Labs, and Max Resnick left the ecosystem to join Solana. Feist's move is particularly sensitive as he made significant contributions to “Danksharding” and has switched to a project related to “enterprise blockchain.”

Galaxy's perspective:

On the surface, the discussion sparked by Feist's exit from the Ethereum Foundation seems like a typical cryptocurrency Twitter drama. However, a deeper revelation exposes the organizational structure of the open-source software (OSS) development community, as well as the private complaints that were once discussed in the community square regarding the impact on Ethereum and the Ethereum Foundation.

Szilágyi emphasized in his notes that, in his view, Ethereum protocol contributors have not been fairly compensated. The compensation of open source software developers has been a contentious topic for decades. Open source software itself has inherent contradictions. It is built on philosophical ideals of freedom, transparency, and creating public good. These ideals often conflict with the economic realities of maintaining software personnel. This contradiction still exists today, especially in blockchain ecosystems that position themselves as decentralized, open protocols. Thus, in these cases, the question is not just how much compensation should be paid to developers, what work should be incentivized, and who decides this distribution.

The structural ambiguity of Ethereum exacerbates this challenge. Due to the grand and ambitious goals (such as building a “world computer”) and the unclear direction of leadership, it is difficult to establish clear priorities and compensation standards. In the absence of a clear strategic direction, allocation decisions may default to informal factors, such as social capital, proximity to influential figures, or access to external funding sources. When the priorities of the protocol remain to be clarified, the same applies to compensation issues, making it even more challenging to distinguish between reasonable differences and arbitrary decisions. As a result, in this system, individual contributors must meet vague expectations, the authority of leadership to set goals and allocate resources is uncertain, and the community lacks a clear basis to evaluate both. Complaints about compensation are not merely about fair payment to employees. They concern whether the organization can operate coherently when its mission and management structure are unclear.

Despite the somewhat intense tone of these conversations, their appearance in public forums marks a significant advancement. Complaints that were once kept behind closed doors have now turned into open debates. For the community, this is a troubling yet necessary step that can better establish accountability and maturity within the Ethereum leadership.