In-depth Analysis of the Public Chain Industry in February 2025: Innovations and Challenges Amid Market Adjustments

In February 2025, the blockchain market experienced a significant adjustment, posing challenges to both mainstream networks and emerging public chains. Bitcoin performed relatively steadily, further consolidating its dominant position, while most chains, including Solana, Avalanche, and Ethereum, saw considerable declines. Nevertheless, innovation activities in the public chain sector did not cease: the Berachain mainnet went live, a major exchange's ecosystem infrastructure was upgraded, and a well-known decentralized exchange launched Layer 2 solutions, becoming the highlights of the month.

Market Overview

The market experienced a significant correction 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 closely follows January's bull market, but the market signals are complex, as investors oscillate between optimistic sentiment 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 has felt the impact of hacker attacks more intensely.

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 a trading platform on February 21 resulted in losses of $1.5 billion, setting a record for the largest loss in cryptocurrency history, raising new security concerns and causing a swift shift in market sentiment. Meanwhile, the SEC's stance has softened, suspending investigations into several well-known cryptocurrency companies and dropping the appeal of the "dealer rules." 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 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 a total market value decline of 20.8% to $2.3 trillion. Bitcoin's dominance increased from 71.3% to 74.2%, while Ethereum's share shrank from 14.0% to 11.9%. The BNB chain's share slightly rose to 3.7%, but Solana's share fell from 4.0% to 3.3% after a price drop 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.

DeFi TVL dropped 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 utilizes a "Proof of Liquidity" model — an innovative staking method that converts liquidity into network security. Following a $100 million financing round 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 to watch.

The Memecoin craze of Solana has clearly cooled down. High-profile failure cases, such as the token related to Argentine President Milei, have damaged market confidence, leading to a significant decline in trading volume on DEX platforms like Raydium. Although 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 shrunk 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.

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

The downturn 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 slump in February suggests 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 well-known Layer 2 solution maintains its leading position with a TVL of $4.5 billion (down 33.4%), while a large exchange ecosystem climbs to second place with a TVL of $4.2 billion (down 10.6%), pushing another well-known Layer 2 (with $2.1 billion) to third place. Polygon zkEVM surged by 104.1% to $300 million, becoming a rare highlight this month.

A large exchange ecosystem 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 previously processed 95 million transactions on its testnet, positioning itself as a game changer in scalability performance, with heavyweight institutions like Circle joining. Starknet's Nums application chain, as a Layer 3 gaming innovation, showcases the future of modular design.

Meanwhile, while Sonic EVM is not an Ethereum Layer 2, its Mobius mainnet launch on February 27 as Solana's first SVM chain expansion attracted significant attention, achieving 10,000 TPS and bringing in $47.6 million in funding for a certain DeFi protocol within a few 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 in the increasingly fierce competition. He advocates for Layer 2 to play a leading role in scalability (such as a 17x increase in transactions) and interoperability, noting that they have evolved from "advanced multi-signature" to powerful 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.

The content of this article is for industry research and communication purposes only and does not constitute any investment advice. The market is risky, and investments should be made with caution.