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

In February 2025, the blockchain market experienced significant adjustments, posing challenges to various networks. Bitcoin remained relatively stable, strengthening its dominant position, while most other chains, including Solana, Avalanche, and Ethereum, saw significant declines. Nevertheless, development activities in the public chain space did not stagnate, with the launch of the Berachain mainnet, upgrades to the Base infrastructure, and Uniswap's new moves on Layer 2 becoming highlights of the month.

Market Overview

The market saw a significant pullback in February: Bitcoin dropped from $98,768 to $84,177, a decline of 14.8%; Ethereum experienced an even larger drop, falling from $3,065 to $2,216, a decrease of 27.7%. In the last week of the month, selling pressure intensified due to spreading security concerns.

This pullback follows the bull market in January, but the market signals are complex, with investors wavering between optimistic sentiment and concerns triggered 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 feels the impact of safety incidents more strongly.

Regulatory and Policy Changes

The U.S. government's executive order on cryptocurrency focuses on self-custody and the development of stablecoins, providing the industry with a rare clarity of policy. However, a major security incident on February 21 resulted in losses of up to $1.5 billion, setting a record for the largest loss in cryptocurrency history, raising new security concerns and rapidly shifting market sentiment. Meanwhile, the attitude of regulatory agencies has softened, suspending investigations into certain major trading platforms and dropping appeals on "dealer rules." The bipartisan GENIUS Act further strengthens the regulatory framework for stablecoins, indicating a friendly trend in the U.S. regulatory environment.

Investor behavior reflects this turbulence. The hype driven by tokens related to a certain country's president quickly cooled off due to negative news, leading to a sharp drop in valuation and a significant shrinkage in trading volume. This shift suggests that the market is retreating from high-risk assets.

Layer 1

Layer 1 public chains are generally under pressure, with the total market capitalization declining by 20.8% to $2.3 trillion. Bitcoin's dominance rose from 71.3% to 74.2%, while Ethereum's share shrank from 14.0% to 11.9%. The share of a certain public chain slightly increased to 3.7%, but Solana's share dropped from 4.0% to 3.3% after a price plunge of 36.3%.

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

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 rapidly, jumping to sixth place with a TVL of $3.2 billion after launching its mainnet on February 6. The chain issued 80 million BERA tokens and adopted a "Proof of Liquidity" model—an innovative staking method that transforms liquidity into network security. Following large-scale financing in 2024, this month's airdrop and governance incentives have energized market enthusiasm. Unlike traditional Proof of Stake, this approach may redefine how public chains balance growth and stability, making Berachain a project worth watching.

The speculative token craze for Solana has noticeably cooled off. High-profile failure cases have damaged market confidence, leading to a significant decline in trading volumes on certain decentralized exchanges. Although these types of tokens will not disappear and can be seen as digital collectible cards, their peak frenzy may have passed, and traders are starting to pay more attention to 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 dropping 7.9% to $220 million.

Among mid-sized platforms, Merlin performed relatively well, with TVL decreasing slightly by 9.3% to $150 million. Smaller platforms face greater pressure, with SatoshiVM down 31.5%, MAP Protocol down 29.6%, and Interlay down 27.4%.

The downturn in this field aligns with the views of an industry expert at a recent conference: "As initial enthusiasm wanes, more than 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 slump in February indicates that consolidation may have already begun. Looking ahead, platforms that can demonstrate actual utility may prove to be more durable than projects that rely solely on momentum.

Ethereum Layer 2

Ethereum L2 TVL has dropped by 23.4% to $14 billion. Arbitrum maintains its leading position with a TVL of $4.5 billion (down 33.4%), while a certain platform rises to second place with a TVL of $4.2 billion (down 10.6%), pushing Optimism ($2.1 billion) to third. Polygon zkEVM surged by 104.1% to $300 million, becoming a rare highlight this month.

A certain platform has launched Flashblocks (faster transaction confirmations), Appchains (customized L3), and smart wallet sub-accounts, aiming to maintain user stickiness. Unichain's mainnet launched on February 16, having previously processed 95 million transactions on its testnet, positioning itself as a game changer in scalability performance, with several heavyweight institutions already on board. Starknet's Nums application chain, as a Layer 3 gaming innovation, showcases the future of modular design.

At the same time, Sonic EVM, although not an Ethereum Layer 2, attracted significant attention with its Mobius mainnet launch on February 27 as the first SVM chain expansion of Solana, achieving 10,000 TPS and bringing in $47.6 million in funding for Aave within days. These initiatives indicate that Layer 2 projects are increasingly investing in technology rather than just hype.

The founder of Ethereum commented on February 19, emphasizing that Ethereum needs to clarify its positioning in the face of increasing competition. He advocated for Layer 2 to take a leadership role in scalability (such as a 17x transaction increase) and interoperability, noting that they have evolved from "advanced multi-signature" to powerful networks. Although he did not directly comment on Sonic EVM, its EVM compatibility and speed resonate with his vision of a seamless connection to 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

Financing 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, planning to launch in the first quarter of 2025. Fluent Labs secured $8 million in funding to develop a multi-VM Layer 2 connecting Ethereum and Solana.