February 2025 Public Chain Industry Analysis: Challenges and Innovations in Market Adjustment

In February 2025, the blockchain market experienced significant adjustments, affecting both mature networks and emerging public chains. Bitcoin demonstrated robustness, further consolidating its market dominance, while most chains, including Solana, Avalanche, and Ethereum, faced substantial declines. Nevertheless, development activities in the public chain sector did not stagnate: the launch of the Berachain mainnet, upgrades to Base infrastructure, and the rollout of Uniswap's Layer 2 became the highlights of the month.

Market Overview

February market saw a significant correction: Bitcoin fell from $98,768 to $84,177, a drop of 14.8%, while Ethereum experienced an even larger decline, dropping from $3,065 to $2,216, a decrease of 27.7%. In the last week of the month, as security concerns spread, selling pressure intensified.

This pullback follows the bullish market in January, but market signals are complex, with investors oscillating between optimism and concerns raised by safety risks. Market sentiment has deteriorated, and risk appetite has decreased, especially in more speculative areas. Globally, the North American market shows cautious optimism due to policy changes, while the Asia-Pacific market has felt the impact of hacking incidents more strongly.

Regulatory and Policy Trends

The Trump administration's executive order on cryptocurrency focuses on self-custody and the development of stablecoins, providing rare policy clarity for the industry. However, a hacking incident on a trading platform on February 21 resulted in a loss of $1.5 billion, setting a record for the largest loss in cryptocurrency history and raising new security concerns, leading to a swift shift in market sentiment. Meanwhile, the SEC's stance has softened, pausing investigations into several well-known companies and dropping the appeal on the "dealer rules." The bipartisan GENIUS Act (the "American Stablecoin Innovation and Establishment Act") further refines the regulatory framework for stablecoins, indicating a friendly trend in the U.S. regulatory environment.

Investor behavior reflects this turbulence. The cryptocurrency craze driven by tokens related to Argentine President Milei quickly cooled due to negative news, leading to a sharp drop in valuations and a significant shrinkage in trading volume. This shift suggests that the market is retreating from high-risk assets.

Layer 1 Development

Layer 1 public chains are generally under pressure, with a total market capitalization declining by 20.8% to $2.3 trillion. Bitcoin's dominance has risen from 71.3% to 74.2%, while Ethereum's share has shrunk from 14.0% to 11.9%. The BNB chain's share has slightly increased to 3.7%, but Solana's share has dropped from 4.0% to 3.3% following a 36.3% price crash.

Litecoin surged against the trend, rising 1.0% to $128.7, while Solana (-36.3%), Avalanche (-35.7%), and others lagged behind.

The total value locked (TVL) in DeFi decreased by 20.0% to $82.9 billion, with Ethereum at $44.9 billion (down 21.7%) and Solana at $8.6 billion (down 34.1%).

Berachain has emerged as a strong contender, quickly rising to sixth place after its mainnet launch on February 6, with a TVL of $3.2 billion. The chain issued 80 million BERA tokens and adopted a "Proof of Liquidity" model—an innovative staking method that converts liquidity into network security. Following a $100 million financing round in 2024, this month's airdrop and governance incentives have sparked market enthusiasm. Unlike traditional Proof of Stake, this approach could redefine how public chains balance growth and stability, making Berachain a project worth paying attention to.

The virtual currency boom of Solana has clearly cooled down. High-profile failures, such as the token related to Argentine President Milei, have undermined market confidence, leading to a significant decline in trading volumes across various decentralized exchanges. While these tokens are unlikely to disappear and can be viewed as digital collectible cards, their peak frenzy may have passed, with traders beginning to focus more on fundamentals rather than speculation.

Bitcoin Layer 2 and Sidechains

The TVL of Bitcoin L2 and sidechains has decreased by 24.5% from $2.7 billion to $2.1 billion. Core leads with a TVL of $460 million (down 42.0%), followed by Bitlayer ($350 million) and BSquared ($320 million). BOB performed well, only down 7.9% to $220 million.

Among medium-sized platforms, Merlin performed relatively well, with a slight decrease in TVL of 9.3% to $150 million. Smaller platforms faced greater pressure, with SatoshiVM down 31.5%, MAP Protocol down 29.6%, and Interlay down 27.4%.

The slump in this field is consistent with the views of a certain notable figure at Consensus 2025: "As the initial enthusiasm fades, over two-thirds of existing Bitcoin Layer 2 projects will disappear within three years." He predicts that the market will face severe challenges, and the industry's slump in February suggests that consolidation may have already begun. Looking ahead, platforms that can demonstrate real utility may be more durable than projects that rely solely on momentum to sustain themselves.

Ethereum Layer 2 Progress

Ethereum L2 TVL decreased by 23.4% to $14 billion. A certain Layer 2 platform maintains its leading position with a TVL of $4.5 billion (a decrease of 33.4%), while Base climbs to second place with a TVL of $4.2 billion (a decrease of 10.6%), pushing another Layer 2 platform ($2.1 billion) to third place. Polygon zkEVM surged by 104.1% to $30 million, becoming a rare highlight this month.

Base has launched Flashblocks (faster transaction confirmations), Appchains (customized L3), and smart wallet sub-accounts, aiming to maintain user engagement. A certain Layer 2 platform launched its mainnet on February 16, having processed a total of 95 million transactions on its testnet prior, positioning itself as a game changer for scaling performance, with multiple heavyweight institutions joining. Starknet's Nums application chain, as a Layer 3 gaming innovation, showcases the future of modular design.

Meanwhile, although Sonic EVM is not an Ethereum Layer 2, its Mobius mainnet launch on February 27 as the first SVM chain expansion of Solana has attracted a lot of attention, achieving 10,000 TPS and bringing $47.6 million in funding to a certain DeFi protocol within a few days. These initiatives demonstrate that Layer 2 projects are investing more in technology rather than just hype.

Vitalik Buterin commented on February 19, emphasizing that Ethereum needs to clarify its positioning amidst increasing competition. He advocates for Layer 2 to take a leadership role in scalability (such as a 17x increase in transactions) and interoperability, noting that they have evolved from "advanced multi-signatures" into powerful networks. Although he did not directly comment on Sonic EVM, its EVM compatibility and speed resonate with his vision of a seamless connection within the "Ethereum universe." However, he also expressed dissatisfaction with the casino-like tendencies in the ecosystem, calling for a focus on real value rather than speculative bubbles.

Financing Situation

Funding activities have slowed down, with a total of 6 transactions completed in February, amounting to $32.4 million. Mango Network raised $13.5 million for its EVM-MoveVM hybrid chain, which is planned to launch in Q1 2025. Fluent Labs secured $8 million in funding to develop a multi-VM Layer 2 connecting Ethereum and Solana.