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

In February 2025, the blockchain market experienced a significant downturn adjustment, posing challenges to both mainstream and emerging public chains. Bitcoin remained relatively stable, further strengthening its market dominance, while most public chains, including Solana, Avalanche, and Ethereum, saw substantial declines. Nevertheless, development activity in the public chain sector did not come to a halt: the launch of the Berachain mainnet, upgrades to the Base infrastructure, and the introduction of a Layer 2 solution for a certain DEX became highlights of the month.

Market Overview

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

This pullback follows the upward trend in January, but market signals are complex, with investors oscillating between optimism and concerns triggered by security vulnerabilities. Market sentiment has deteriorated, and risk appetite has declined, especially in speculative areas such as Memecoins. Globally, the North American market shows cautious optimism due to policy changes, while the Asia-Pacific market feels the impact of hacking 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 the industry with rare policy clarity. However, a hacking incident on February 21 at a certain trading platform resulted in a loss of $1.5 billion, setting a record for the largest loss in cryptocurrency history, raising new security concerns and quickly shifting market sentiment. Meanwhile, the SEC's stance has softened, pausing investigations into certain major cryptocurrency firms and abandoning its appeal on the "dealer rule." 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 turbulence. The Memecoin craze driven by Argentine President Milei's related tokens has rapidly cooled due to negative news, leading to a sharp decline 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 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 has risen against the trend, up 1.0% to $128.7, while Solana (-36.3%), Avalanche (-35.7%), and others have lagged behind.

DeFi TVL 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, adopting 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 sparked 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 Memecoin craze of Solana has obviously cooled down. High-profile failures, such as the token related to Argentine President Milei, have damaged market confidence, leading to a significant decline in trading volume on certain DEX platforms. While Memecoins will not disappear and can be seen as digital collectible cards, their peak frenzy may have passed, and traders are beginning to pay more attention to fundamentals rather than speculation.

Bitcoin Layer 2 & 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 medium-sized platforms, Merlin performed relatively well, with TVL decreasing slightly by 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 the sector aligns with the views of Stacks co-founder Muneeb Ali at Consensus 2025: "As initial enthusiasm wanes, 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 downturn in February suggests 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 fell by 23.4% to $14 billion. Arbitrum 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 launched Flashblocks (faster transaction confirmations), Appchains (customized L3), and smart wallet sub-accounts, aimed at maintaining user stickiness. Unichain's mainnet was launched on February 16, having 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 $47.6 million in funding to a certain DeFi platform 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 amid increasing competition. He advocated for Layer 2 to take a leading role in scalability (such as a 17-fold increase in transactions) and interoperability, pointing out that they have evolved from "advanced multi-signature" to robust 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 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, with plans 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.

This article is for industry research and communication purposes only and does not constitute any investment advice. The market is risky, and investment should be approached with caution.