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

In February 2025, the blockchain market underwent a significant adjustment, presenting challenges to both mature networks and emerging public chains. Bitcoin demonstrated resilience, further solidifying its dominant position, while most chains, including Solana, Avalanche, and Ethereum, experienced substantial declines. Nevertheless, development activity in the public chain sector has not stalled: the launch of the Berachain mainnet, upgrades to the Base infrastructure, and Uniswap's Layer 2 solution became the highlights of the month.

Market Overview

The market showed a significant correction in February: Bitcoin fell from $98,768 to $84,177, a decline of 14.8%, while Ethereum experienced an even greater drop, falling from $3,065 to $2,216, a decline of 27.7%. In the last week of the month, as panic stemming from security risks spread, selling pressure intensified.

This pullback follows the bull market in January, but market signals are complex, with investors oscillating between optimism and concerns raised by security vulnerabilities. Market sentiment has deteriorated, and risk appetite has declined, particularly 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 cyberattacks more strongly.

Regulatory and Policy Evolution

The U.S. government's cryptocurrency executive order focuses on self-custody and stablecoin development, providing the industry with rare policy clarity. However, a major hacking incident on February 21 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 attitude of regulators has softened, pausing investigations into certain large trading platforms and abandoning appeals on "dealer rules." The bipartisan GENIUS Act (the U.S. Stablecoin National Innovation and Establishment Act) further refines the regulatory framework for stablecoins, indicating a friendly trend in the U.S. regulatory environment.

Investor behavior reflects this turbulence. The speculation frenzy driven by a certain country's president-related tokens quickly cooled due to the related 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 Development

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 trading platform chain 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%), Avalanche (-35.7%), and others are lagging 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 has issued 80 million BERA tokens, utilizing a "Proof of Liquidity" model—an innovative staking method that transforms liquidity into network security. Following a $100 million financing in 2024, this month's airdrop and governance incentives 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 speculative token frenzy of Solana has clearly cooled down. High-profile failures have damaged market confidence, leading to a significant drop in trading volumes on some decentralized exchanges. Although these types of tokens will not disappear and can be viewed as digital collectible cards, their peak frenzy may be over, and traders are starting to pay more attention to 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 (down 42.0%), followed by Bitlayer ($350 million) and BSquared ($320 million). BOB performed notably 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, however, faced greater pressure, with SatoshiVM down 31.5%, MAP Protocol down 29.6%, and Interlay down 27.4%.

The slump in this sector aligns with the views of a well-known figure at Consensus 2025: "As the initial enthusiasm fades, more than two-thirds of the existing Bitcoin Layer 2 projects will disappear within three years." He predicts that the market will face severe challenges, and the decline in February indicates that consolidation may have already begun. Looking ahead, platforms that can demonstrate real 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. A certain Layer 2 platform 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 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 retention. Unichain's mainnet was 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 already on board. 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 significant attention, achieving 10,000 TPS and bringing $47.6 million in funding to a certain DeFi protocol within days. These initiatives indicate that Layer 2 projects are increasingly investing in technology rather than just hype.

The founder of Ethereum commented on February 19, emphasizing that Ethereum needs to clarify its positioning amid increasing competition. He advocates for Layer 2 to take a leading role in scalability (such as a 17x 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 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 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.