ETH Decentralization Under Fire: Core Developer Warns of ‘Closed Network’ & Insider Investment at EF

Ethereum Governance Faces Scrutiny as Core Developer and Polygon Founder Raise Concerns

The Ethereum ecosystem, a cornerstone of decentralized finance and blockchain innovation, is facing a wave of criticism from within its ranks. Péter Szilágyi, a veteran Ethereum Core Developer, and Sandeep Nailwal, CEO and founder of the Polygon Foundation, have publicly voiced concerns about the Ethereum Foundation’s governance structure, accusing it of centralized control and a lack of transparency. These critiques highlight tensions within the Ethereum community as it navigates its role as a leading blockchain platform.

Szilágyi’s Critique of Centralized Control

Péter Szilágyi, a key figure in Ethereum’s development since 2015, recently shared a mid-2024 memo that sparked significant discussion within the crypto community. As the leader of the Geth project—the most widely used software client for running Ethereum nodes, commanding roughly 41% of the market share—Szilágyi is a respected voice in the ecosystem. His memo accused the Ethereum Foundation (EF), the non-profit organization supporting Ethereum’s growth, of operating under a centralized governance model dominated by a select group of insiders.

Szilágyi argued that Vitalik Buterin, Ethereum’s co-founder and most prominent advocate, wields significant indirect control over the ecosystem. While expressing admiration for Buterin’s intellect and contributions, Szilágyi claimed that the founder’s influence shapes which projects succeed and which behaviors are deemed acceptable. “Vitalik’s attention, research direction, brainpower, donations, and investments absolutely define which projects succeed with a very high probability,” Szilágyi wrote. He further suggested that gaining the approval of a small circle of 5–10 influential figures close to Buterin is often the key to securing Foundation support.

The developer also criticized the Foundation’s approach to external investment, alleging it has shifted away from its original ethos of fostering open, community-driven projects. Instead, Szilágyi claimed the EF now favors a closed network of recurring investors and advisors, with the same individuals appearing behind many new Ethereum-based projects. This, he argued, creates an ecosystem where opportunities are concentrated among a select few, undermining Ethereum’s decentralized principles.

Polygon Founder Amplifies Concerns

Adding fuel to the debate, Sandeep Nailwal, CEO of the Polygon Foundation, took to social media to echo Szilágyi’s concerns and express his own frustrations. Polygon, a Layer-2 scaling solution built on Ethereum, has been instrumental in enhancing Ethereum’s transaction speed and cost-efficiency. However, Nailwal revealed his growing disillusionment with the Ethereum Foundation, questioning his loyalty to the ecosystem that inspired his entry into the crypto space.

In a post on X dated October 20, 2025, Nailwal stated, “Why does it feel like every other week, someone with major contributions to Ethereum has to publicly question what they’re even doing here?” He highlighted the Foundation’s failure to grant Polygon official recognition as a Layer-2 network, which would provide enhanced security guarantees and formal integration into Ethereum’s ecosystem. This lack of acknowledgment has been a point of contention for Polygon, despite its significant contributions, including hosting Polymarket, a successful decentralized prediction market platform.

Nailwal’s comments reflect a broader sentiment within the Ethereum community: a growing frustration with the Foundation’s decision-making processes and perceived favoritism. His public critique underscores the challenges of maintaining a decentralized ethos while managing a complex, global ecosystem.

Vitalik Buterin’s Response

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In response to the mounting criticism, Vitalik Buterin addressed the issue on X on October 21, 2025. He expressed appreciation for Nailwal’s contributions and Polygon’s role in the Ethereum ecosystem, particularly highlighting Polymarket’s success as a “not just boring finance” application. Buterin’s acknowledgment aimed to bridge the gap between the Foundation and its critics, but it did little to address the broader concerns about governance and centralization raised by Szilágyi and Nailwal.

The Broader Implications for Ethereum

The criticisms from Szilágyi and Nailwal come at a pivotal moment for Ethereum. As the blockchain continues to dominate the decentralized finance (DeFi) and non-fungible token (NFT) spaces, questions about its governance model could impact its long-term credibility and adoption. Ethereum’s Proof-of-Stake transition in 2022, known as the Merge, was hailed as a step toward greater scalability and sustainability. However, the current debate suggests that governance challenges could pose a significant hurdle to Ethereum’s vision of true decentralization.

The Ethereum Foundation plays a critical role in funding research, development, and community initiatives. Yet, Szilágyi’s allegations of a “ruling elite” and Nailwal’s frustration with the Foundation’s lack of inclusivity raise questions about how decisions are made and who benefits. For a platform that prides itself on decentralization, these critiques highlight the need for greater transparency and broader community involvement in governance processes.

Key Issues Facing Ethereum Governance

Centralized Influence: Szilágyi’s claim that a small group of insiders holds disproportionate power suggests a disconnect between Ethereum’s decentralized ideals and its operational reality.
Investment Practices: The shift toward a closed network of investors and advisors could limit opportunities for new projects and stifle innovation.
Layer-2 Recognition: Polygon’s struggle for official recognition underscores the challenges faced by Layer-2 solutions, which are critical to Ethereum’s scalability.
Community Trust: Public criticisms from prominent figures like Szilágyi and Nailwal could erode confidence in Ethereum’s leadership and governance model.

The Path Forward for Ethereum

To address these concerns, the Ethereum Foundation may need to adopt a more inclusive and transparent approach to governance. Potential steps could include:

Decentralized Decision-Making: Establishing a broader, community-driven governance model to reduce reliance on a small group of insiders.
Clear Criteria for Support: Creating transparent guidelines for project funding and recognition to ensure fairness and accessibility.
Engaging Layer-2 Networks: Formalizing relationships with Layer-2 solutions like Polygon to strengthen the ecosystem and enhance scalability.
Open Dialogue: Encouraging open communication between the Foundation, developers, and the broader community to address concerns and rebuild trust.

Ethereum’s Market Context

As of October 21, 2025, Ethereum (ETH) remains the second-largest cryptocurrency by market capitalization, trailing only Bitcoin. While specific pricing data fluctuates, ETH continues to be a cornerstone of the crypto market, with its value driven by its role in DeFi, NFTs, and smart contracts. Polygon (POL), meanwhile, has solidified its position as a leading Layer-2 solution, offering lower transaction fees and faster processing times compared to Ethereum’s mainnet.

The ongoing governance debate could influence investor sentiment and Ethereum’s competitive position against other blockchains like Solana, Cardano, and Binance Smart Chain, which have their own approaches to scalability and governance. Addressing these concerns promptly will be crucial to maintaining Ethereum’s leadership in the blockchain space.

Conclusion

The criticisms from Péter Szilágyi and Sandeep Nailwal highlight a critical juncture for Ethereum as it grapples with questions of governance, transparency, and decentralization. While Vitalik Buterin’s influence has been a driving force behind Ethereum’s success, the concentration of power within a small group raises concerns about the platform’s long-term sustainability. As the Ethereum Foundation navigates these challenges, fostering greater inclusivity and openness will be essential to preserving the trust of developers, investors, and the broader community. For now, the crypto world watches closely to see how Ethereum will respond to these calls for reform and whether it can live up to its decentralized ideals.

Srebrin Petrov publication: "ETH Decentralization Under Fire: Core Developer Warns of ‘Closed Network’ & Insider Investment at EF" was written for 24crypto.news