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

In February 2025, the blockchain market experienced significant adjustments, posing challenges to various public chains. Bitcoin demonstrated resilience, further solidifying its dominant position, while most chains, including Solana, Avalanche, and Ethereum, faced substantial declines. Nevertheless, development activities in the public chain sector remained active: the Berachain mainnet launch, Base infrastructure upgrades, and Uniswap's Layer 2 launch were highlights of the month.

Market Overview

The market experienced a significant pullback in February: Bitcoin fell from $98,768 to $84,177, a decline of 14.8%; Ethereum saw an even larger drop, falling 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 further.

This pullback follows the bullish market trend of January, but the market signals are complex, leaving 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 hacker attacks more strongly.

Regulatory and Policy Changes

The U.S. government's cryptocurrency executive order focuses on self-custody and the development of stablecoins, providing valuable policy clarity for the industry. However, a significant hacking 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 swiftly shifting market sentiment. At the same time, regulators have softened their stance, pausing investigations into several well-known companies and abandoning appeals against the "dealer rules." The bipartisan GENIUS Act (the "U.S. Stablecoin National Innovation and Establishment Act") further refines the regulatory framework for stablecoins, demonstrating a friendly trend in the U.S. regulatory environment.

Investor behavior reflects this turbulence. The surge driven by a certain country's president's related tokens rapidly cooled down due to negative news, leading to a plummet in valuations 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%. A certain chain's share slightly increased to 3.7%, but Solana's share dropped from 4.0% to 3.3% after a price plunge of 36.3%.

Litecoin is rising against the trend, up 1.0% to $128.7, while Solana (-36.3%) and Avalanche (-35.7%) are lagging 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 has issued 80 million BERA tokens and employs 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 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 frenzy of Solana has clearly cooled down. High-profile failures have damaged market confidence, leading to a significant drop in trading volume across multiple trading platforms. Although these types of tokens will not disappear and can be seen as digital collectible cards, their peak fervor may have passed, and traders are beginning 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. A certain project leads with a TVL of $460 million (down 42.0%), followed by two emerging projects with $350 million and $320 million, respectively. A project named BOB performed well, only dropping 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, on the other hand, are under greater pressure, with multiple projects experiencing declines ranging from 27% to 31%.

The current downturn in the sector aligns with industry experts' predictions: "As the initial enthusiasm fades, more than two-thirds of existing Bitcoin Layer 2 projects will vanish within three years." The industry's slump in February suggests that consolidation may have already begun. Looking ahead, platforms that can demonstrate real utility may prove to be more enduring than projects that rely solely on momentum.

Ethereum Layer 2

Ethereum L2 TVL declined by 23.4% to $14 billion. One project remains in the lead with a TVL of $4.5 billion (down 33.4%), while another project climbed to second place with a TVL of $4.2 billion (down 10.6%), pushing the third place (with $2.1 billion) to third. An emerging project surged by 104.1% to $30 million, becoming a rare highlight this month.

A well-known project has launched Flashblocks (faster transaction confirmations), Appchains (custom L3), and smart wallet sub-accounts, aiming to retain user engagement. Unichain's mainnet launched on February 16, after its testnet processed a total of 95 million transactions, positioning itself as a game changer in scalability performance, with several heavyweight institutions already on board. The application chain of a certain project, as a Layer 3 gaming innovation, showcases the future of modular design.

At the same time, although it is not an Ethereum Layer 2, Sonic EVM launched on February 27 as Solana's first SVM chain expansion, attracting a lot of attention, achieving 10,000 TPS, and bringing $47.6 million in funding to a certain project 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 amid increasing competition. He advocated for Layer 2 to take the lead in scalability (such as a 17-fold increase in transactions) and interoperability, pointing out that they have evolved from "advanced multi-signatures" into robust networks. He expressed dissatisfaction with the casino-like tendencies in the ecosystem and called 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 Q1 2025. Fluent Labs secured $8 million in funding to develop a multi-virtual machine Layer 2 that connects Ethereum and Solana.