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

In February 2025, the blockchain market underwent a significant adjustment, bringing challenges to both mature networks and emerging public chains. Bitcoin demonstrated strong resilience, further solidifying its dominant position in the market, while most chains, including Solana, Avalanche, and Ethereum, experienced substantial declines. Nevertheless, development activities in the public chain sector remained active: the launch of the Berachain mainnet, upgrades to the Base infrastructure, and the introduction of Uniswap's Layer 2 solution became highlights of the month.

Market Overview

February market showed a significant pullback: Bitcoin fell from $98,768 to $84,177, a decline of 14.8%, while Ethereum had an even larger drop, falling from $3,065 to $2,216, a decline of 27.7%. In the last week of the month, as concerns over security risks spread, selling pressure intensified.

This pullback follows the bullish market in January, but the market signals are complex, with investors wavering between optimistic sentiment and concerns raised by security vulnerabilities. Market sentiment has deteriorated, and risk appetite has declined, especially in more speculative areas. Globally, the North American market is showing cautious optimism due to policy changes, while the Asia-Pacific market is feeling the impact of security incidents more acutely.

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 security incident that occurred on February 21 at a trading platform resulted in a loss of $1.5 billion, setting a record for the largest loss in cryptocurrency history and raising new security concerns, causing market sentiment to shift rapidly. Meanwhile, regulatory agencies have softened their stance, suspending investigations into several well-known companies and abandoning appeals against the "dealer rules." The bipartisan GENIUS Act (the American Stablecoin Innovation and Establishment Act) further strengthens the regulatory framework for stablecoins, indicating a friendly trend in the U.S. regulatory environment.

Investor behavior reflects this turmoil. The speculative craze driven by tokens associated with certain political figures in a specific country has rapidly cooled due to related negative news, leading to a sharp decline in valuations and a significant contraction in trading volumes. This shift suggests that the market is retreating from high-risk assets.

Performance of Layer 1 Public Chains

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 share of a certain chain 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 against the trend, increasing by 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 rapidly, 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 transforms liquidity into network security. Following a $100 million financing in 2024, this month's airdrop and governance rights have excited the market. Unlike traditional proof of stake, this approach could redefine how public chains balance growth and stability, making Berachain a project worth watching.

The speculative frenzy surrounding Solana has clearly cooled down. High-profile failures have damaged market confidence, leading to a significant drop in trading volumes across multiple exchanges. While speculative tokens are unlikely to disappear and can be viewed as digital collectible cards, their peak frenzy may have passed, and traders are beginning to pay more attention to fundamentals rather than hype.

Bitcoin Layer 2 and Sidechains

The TVL of Bitcoin L2 and sidechains decreased by 24.5% from $2.7 billion to $2.1 billion. Core leads with a TVL of $460 million (a drop of 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 well, with TVL decreasing slightly by 9.3% to $150 million. Small platforms faced 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 industry experts: "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 serious challenges, and the industry's downturn in February suggests that consolidation may have already begun. Looking ahead, platforms that can demonstrate actual utility may prove to be more enduring than projects that rely solely on momentum.

Ethereum Layer 2

Ethereum L2 TVL decreased by 23.4% to $14 billion. A certain DEX maintains its leading position with a TVL of $4.5 billion (down 33.4%), while Base 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.

Base has launched Flashblocks (faster transaction confirmations), Appchains (customized 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 Mobius mainnet launch on February 27 as the first SVM chain expansion of Solana attracted a lot of attention, achieving 10,000 TPS and bringing in $47.6 million in funding for Aave within a few days. These initiatives indicate that Layer 2 projects are investing more in technology rather than just hype.

The founder of Ethereum commented on February 19, emphasizing the need for Ethereum to clarify its positioning amidst 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 robust networks. Although he did not comment directly 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 Status

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-Virtual Machine Layer 2 that connects Ethereum and Solana.