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

In February 2025, the blockchain market experienced significant adjustments, posing challenges to both mainstream and emerging public chains. Bitcoin demonstrated robustness, further consolidating its market dominance, while most public chains, including Solana, Avalanche, and Ethereum, saw substantial declines. Nevertheless, development activity in the public chain sector remained vibrant: the Berachain mainnet launch, Base infrastructure upgrades, and Uniswap's introduction of Layer 2 solutions were the highlights of the month.

Market Overview

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

This pullback closely follows the bull market trend in January, but market signals are complex, with investors wavering between optimism and concerns raised by safety hazards. Market sentiment has deteriorated, and risk appetite has declined, particularly 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 hacker attacks more strongly.

Regulatory and Policy Trends

The U.S. government's cryptocurrency executive order focuses on self-custody and the development of stablecoins, providing rare policy clarity for the industry. However, a major hacking incident on February 21 resulted in a loss of $1.5 billion, setting a record for the largest single loss in cryptocurrency history, raising new security concerns and causing a rapid shift in market sentiment. Meanwhile, the SEC's stance has softened, pausing investigations into several large trading platforms and abandoning its appeal on the "dealer rule." The bipartisan "U.S. Stablecoin National Innovation and Establishment Act" further refines the regulatory framework for stablecoins, indicating a friendlier regulatory environment in the U.S.

Investor behavior reflects this turmoil. The speculative frenzy driven by tokens related to a certain country's president quickly cooled due to negative news, causing valuations to plummet and trading volumes to shrink significantly. This shift suggests that the market is retreating from high-risk assets.

Layer 1 Public Chain Performance

Layer 1 public chains are generally under pressure, with a total market capitalization decline of 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 BNB chain's share slightly increased to 3.7%, but Solana's share fell from 4.0% to 3.3% after a price drop of 36.3%.

Litecoin rose slightly by 1.0% to $128.7, while Solana (-36.3%), Avalanche (-35.7%), and others underperformed.

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

Berachain has emerged strongly, quickly jumping to sixth place after the mainnet launch on February 6, with a TVL of $3.2 billion. The chain issued 80 million BERA tokens and adopted a "liquidity proof" model—an innovative staking method that converts liquidity into network security. Following significant funding in 2024, this month's airdrop and governance incentives have fueled 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 clearly cooled down. High-profile failures have damaged market confidence, leading to a significant drop in trading volume across multiple platforms. Although such tokens will not disappear and can be seen as digital collectibles, their peak frenzy may be over, 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 relatively well, only dropping 7.9% to $220 million.

Among medium-sized platforms, Merlin performed relatively well, with TVL slightly decreasing by 9.3% to $150 million. Small platforms, however, are under greater pressure, with SatoshiVM dropping by 31.5%, MAP Protocol down by 29.6%, and Interlay falling by 27.4%.

The downturn in this field aligns with predictions from industry experts: "As initial enthusiasm wanes, over two-thirds of existing Bitcoin Layer 2 projects will disappear within three years." The industry slump in February indicates that consolidation may have already begun. Looking ahead, platforms that can demonstrate actual utility may be more durable than projects that rely solely on momentum.

Ethereum Layer 2 Development

Ethereum L2 TVL fell by 23.4% to $14 billion. Arbitrum remains in the lead with a TVL of $4.5 billion (down 33.4%), while a trading platform climbs 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 trading platform has launched Flashblocks (faster transaction confirmations), Appchains (customizable L3), and smart wallet sub-accounts, aimed at maintaining user engagement. 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 joining. Starknet's Nums application chain, as a Layer 3 gaming innovation, showcases the future of modular design.

At the same time, although Sonic EVM is not an Ethereum Layer 2, its launch on the Mobius mainnet on February 27 as Solana's first SVM chain expansion attracted a lot of attention, achieving 10,000 TPS and bringing $47.6 million in funding to a lending platform within a few days. These initiatives indicate that Layer 2 projects are increasing their investment in technology rather than just being a gimmick.

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 the lead in scalability (such as a 17-fold 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 within 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 for the development of a multi-Virtual Machine Layer 2 that connects Ethereum and Solana.