Public Chain Industry February 2025 Review: Challenges and Innovations Amid Market Adjustments

In February 2025, the blockchain market experienced a significant adjustment, presenting challenges to both mainstream public chains and emerging networks. Bitcoin demonstrated a relatively robust performance, further solidifying its dominant position, while most public chains, including Ethereum, Solana, and Avalanche, encountered substantial declines. Nevertheless, development activity in the public chain space did not come to a halt: the launch of the Berachain mainnet, the upgrade of the Base infrastructure, and the release of a Layer 2 solution for a certain DEX became highlights of the month.

Market Overview

The market experienced a significant correction in February: Bitcoin fell from $98,768 to $84,177, a drop of 14.8%; Ethereum had an even larger decline, dropping from $3,065 to $2,216, a decrease of 27.7%. In the last week of the month, panic stemming from security concerns spread, further intensifying selling pressure.

This recent pullback closely follows the bullish market trend in January, but market signals are mixed, with investors wavering between optimism and concerns triggered by security vulnerabilities. Market sentiment has deteriorated, and risk appetite has declined, especially in more speculative areas. Globally, the North American market exhibits cautious optimism due to policy changes, while the Asia-Pacific market has felt the impact of hacker attacks more acutely.

Regulatory and Policy Changes

The new cryptocurrency executive order from the U.S. government focuses on self-custody wallets and the development of stablecoins, providing the industry with a rare clarity in policy. However, the 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 and raising new security concerns, causing market sentiment to shift rapidly. Meanwhile, the attitude of regulatory agencies has softened, pausing investigations into several major cryptocurrency companies and dropping appeals regarding the "dealer rules." The bipartisan "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 speculative token frenzy driven by a certain country's president-related tokens has rapidly cooled off due to negative news, leading to a sharp drop in valuations and a significant shrinkage in trading volume. 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 public chain slightly increased to 3.7%, but Solana's share dropped from 4.0% to 3.3% after a price crash 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 risen rapidly to sixth place after its mainnet launch on February 6, with a TVL of $3.2 billion. The chain has issued 80 million BERA tokens, utilizing a "proof of liquidity" model - an innovative staking method that converts liquidity into network security. Following a $100 million financing in 2024, this month's airdrop and governance rights have stimulated 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 speculative token craze of Solana has clearly cooled down. High-profile failures have damaged market confidence, resulting in a significant decline in trading volumes on related DEX platforms. Although these types of tokens will not disappear and can be seen 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 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, with only a 7.9% decline to $220 million.

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

The downturn in this field aligns with the views of certain experts at industry conferences: "As the initial enthusiasm fades, 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 durable than projects that rely solely on momentum.

Ethereum Layer 2

Ethereum L2 TVL decreased 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 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, having processed 95 million transactions on its testnet prior, positioned as a game changer for scaling performance, with several heavyweight institutions joining. Starknet's Nums application chain, as a Layer 3 game innovation, showcases the future of modular design.

Meanwhile, Sonic EVM, although not an Ethereum Layer 2, attracted a lot of attention with its Mobius mainnet launch on February 27 as the first SVM chain expansion of Solana, achieving 10,000 TPS and bringing in $47.6 million for a lending protocol 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 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, 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 in 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 to develop a multi-virtual machine Layer 2 that connects Ethereum and Solana.