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

In February 2025, the blockchain market experienced a significant adjustment, posing challenges to both mainstream networks and emerging public chains. Bitcoin demonstrated strong stability, further consolidating its market dominance, while most chains, including Solana, Avalanche, and Ethereum, saw substantial declines. Nevertheless, development activities in the public chain sector did not stagnate: the launch of the Berachain mainnet, upgrades to the Base infrastructure, and the introduction of a certain DEX on Layer 2 became the highlights of this month.

Market Overview

The market experienced a significant pullback in February: Bitcoin fell from $98,768 to $84,177, a decline of 14.8%, while 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 concerns over security risks spread, selling pressure intensified.

This pullback comes closely after the bull 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 speculative areas like Memecoin. Globally, the North American market shows cautious optimism due to policy changes, while the Asia-Pacific market has felt the impact of hacking attacks more intensely.

Regulatory and Policy Changes

The U.S. government's executive order on cryptocurrency focuses on self-custody and the development of stablecoins, providing rare policy clarity for the industry. However, the hacking incident on February 21 at a certain exchange platform resulted in losses of up to $1.5 billion, setting a record for the largest loss in cryptocurrency history, raising new security concerns and quickly shifting market sentiment. At the same time, the SEC's stance has softened, pausing investigations into certain cryptocurrency firms and abandoning its appeal against the "dealer rule." The bipartisan GENIUS Act (the U.S. Stablecoin National 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 Memecoin craze driven by Argentine President Milei's related tokens has quickly cooled due to negative news, leading to a sharp drop in valuation and a significant contraction 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 a total market capitalization decline of 20.8% to $2.3 trillion. Bitcoin's dominance has increased from 71.3% to 74.2%, while Ethereum's share has shrunk from 14.0% to 11.9%. The BNB chain's share has slightly risen to 3.7%, but Solana's share has dropped from 4.0% to 3.3% after a price crash of 36.3%.

Litecoin is rising against the trend, up 1.0% to $128.7, while Solana (-36.3%), Avalanche (-35.7%), and others 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 risen 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, using a "Proof of Liquidity" model—an innovative staking method that converts liquidity into network security. Following the $100 million financing in 2024, this month's airdrop and governance incentives have sparked market enthusiasm. Unlike traditional Proof of Stake, this approach could redefine how public chains balance growth and stability, making Berachain a project worth watching.

The Memecoin craze in Solana has clearly cooled down. High-profile failures, such as the token associated with Argentine President Milei, have damaged market confidence, leading to a significant decline in trading volume on certain DEX platforms. While Memecoins are unlikely to disappear and can be viewed as digital collectible cards, their peak frenzy may be over, and traders are beginning to focus more on fundamentals rather than speculation.

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 decrease of 42.0%), followed by Bitlayer ($350 million) and BSquared ($320 million). BOB performed well, only dropping 7.9% to $220 million.

In medium-sized platforms, Merlin performed relatively well, with a slight decrease in TVL of 9.3% to $150 million. Smaller platforms, however, are facing greater pressure, with SatoshiVM down 31.5%, MAP Protocol down 29.6%, and Interlay down 27.4%.

The slump in the field aligns with the views of Stacks co-founder Muneeb Ali at Consensus 2025: "As the 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 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 Layer 2 platform maintains its leading position with a TVL of $4.5 billion (a decrease of 33.4%), while Base climbs to second place with a TVL of $4.2 billion (a decrease of 10.6%), pushing another Layer 2 platform ($2.1 billion) to third. Polygon zkEVM surged by 104.1% to $30 million, becoming a rare highlight this month.

Base 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, after its testnet processed a total of 95 million transactions, positioning itself as a game-changer in scaling performance, with some 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 doubling down on technology rather than just being a gimmick.

The founder of Ethereum commented on February 19, emphasizing that Ethereum needs to clarify its position in the face of increasing competition. He advocated for Layer 2 to take a leading role in scalability (such as a 17-fold increase in transactions) and interoperability, noting 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 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 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.