Ethereum in Transition: How Vitalik's Declining Influence Redefines Network Governance

Ethereum governance is undergoing a profound transformation. Over the past two years, the network has witnessed a reconfiguration of power that goes beyond mere technical changes — it is a fundamental redistribution of authority. While Vitalik Buterin, co-founder of the network, sees his direct influence on decision-making gradually diminish, other forces — institutional, economic, and community-driven — are filling the space left open.

The Institutional Wave Transforms the Ecosystem

Ethereum has established itself as the foundation for real-world asset tokenization and stablecoin settlements, attracting giants like BlackRock, Deutsche Bank, and Sony. Over $5 billion in tokenized RWAs are deployed on the network, representing 53% of the total market share. Stablecoin transaction volume reached $67 billion, with $35 billion in USDC circulating on the platform.

These numbers reflect Ethereum’s strength as a financial infrastructure for institutions but also reveal an uncomfortable reality: the network is being progressively shaped by Wall Street’s needs. The adoption of the ERC-3643 standard by DTCC, followed by regulatory involvement from the SEC until July 2025, signals that compliance is ceasing to be a restriction and is becoming a defining trait.

The Paradox of Growing and Losing Power

While receiving institutional capital, Ethereum faces structural challenges. ETH’s relative performance has fallen 16.42% in a year, while Solana and Tron are consolidating their positions by monetizing their institutional user bases more swiftly. This gap is not accidental — it reflects deep tensions within the network’s identity.

Vitalik Buterin’s influence demonstrates this shift particularly clearly. From 2023 to 2025, he transitioned from visionary architect to cautious guardian, advocating the concept of “stagnation” — freezing Ethereum’s core layers in the name of stability. His support for the ZKsync Atlas upgrade exemplifies this stance: instead of pushing radical changes, Buterin now positions himself as a guide for Layer 2 solutions that balance scalability, privacy, and regulatory compliance.

Decentralization in Question

Ethereum’s governance model has become progressively decentralized in theory but concentrated in practice. By 2025, 62% of Ethereum Improvement Proposals (EIPs) originate from external developers outside the core team — a positive indicator of openness. However, Buterin’s advocacy for “minimal governance” — limiting decisions to essential coordination issues — has created a vacuum where few decision-makers, such as Péter Szilágyi and other core developers, retain disproportionate influence.

DeFi pioneers like Andre Cronje question whether this structure truly serves the community’s long-term interests. Ethereum Foundation’s $100 billion security plan has faced criticism for prioritizing institutional demands over grassroots innovation.

Balancing Principles and Reality

Despite these challenges, Ethereum shows a willingness to walk the tightrope. Proposals like EIP-7732 (separating proposer-builder) and zkEVM integration indicate a commitment to increasing censorship resistance while meeting institutional demands. These updates suggest that the network still seeks to preserve its foundational principles even under commercial pressure.

However, the L2 ecosystem fragment erodes the base layer’s fee revenue, complicating the network’s economic equation. The tension between institutional growth and decentralization permeates every governance decision.

The Upcoming Test

Ethereum has reached a critical point. Vitalik Buterin’s influence diminishes not because he failed, but because the network has matured beyond the phase of charismatic leadership. The question now is whether community governance mechanisms can sustain decentralization when institutional and market forces pull in the opposite direction.

In the coming months, investors should watch closely: will Ethereum be able to deliver enterprise-level scalability while maintaining security, privacy, and composability? Or will it become just another asset under the influence of major financial institutions? The answer will determine whether the network remains a decentralized public good or evolves into something fundamentally different.