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

In February, the blockchain market experienced a significant adjustment, posing challenges to both mature and emerging public chains. Bitcoin showed relatively steady performance, further strengthening its dominant position, while most chains, including Solana, Avalanche, and Ethereum, saw substantial declines. Nevertheless, development activity in the public chain sector did not slow down: the launch of the Berachain mainnet, the upgrade of Base infrastructure, and the release of Uniswap's Layer 2 became the highlights of the month.

Market Overview

The market experienced a significant pullback in February: Bitcoin dropped from $98,768 to $84,177, a decrease of 14.8%, while Ethereum saw an even larger drop, falling from $3,065 to $2,216, down 27.7%. In the last week of the month, as security concerns spread, selling pressure intensified.

This pullback follows the bull market in January, but market signals are mixed, with investors oscillating between optimistic sentiment and concerns raised by security vulnerabilities. Market sentiment has deteriorated, and risk appetite has declined, particularly 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 hacking 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 rare policy clarity for the industry. 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, raising new security concerns, and causing market sentiment to shift rapidly. Meanwhile, the SEC's stance has softened, suspending investigations into certain cryptocurrency companies and dropping its appeal of 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 rapidly cooled off due to negative news, leading to a sharp decline in valuation and a significant reduction in trading volume. This shift suggests that the market is withdrawing 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 increased 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 rose against the trend, up 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 with a TVL of $3.2 billion after the mainnet launch on February 6. The chain has issued 80 million BERA tokens and employs a "Proof of Liquidity" model—an innovative staking method that transforms liquidity into network security. Following a $100 million financing round 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 Memecoin craze in Solana has clearly cooled down. High-profile failures, such as the tokens associated with Argentine President Milei, have damaged market confidence, leading to a significant drop in trading volumes on certain DEX platforms. While Memecoins are not going to disappear and can be seen as digital collectible cards, their frenzied peak may have passed, and traders are starting 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 a slight decrease in TVL of 9.3% to $150 million. Smaller platforms faced greater pressure, with SatoshiVM dropping 31.5%, MAP Protocol down 29.6%, and Interlay down 27.4%.

The downturn in this 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 industry downturn in February indicates that consolidation may have already begun. Looking ahead, platforms that can demonstrate actual utility may be more resilient than projects that rely solely on momentum.

Ethereum Layer 2

Ethereum L2 TVL decreased by 23.4% to $14 billion. One Layer 2 platform maintains its leading position with a TVL of $4.5 billion (down 33.4%), while Base climbs 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 launched Flashblocks (faster transaction confirmations), Appchains (customized L3), and smart wallet sub-accounts aimed at maintaining user engagement. Unichain's mainnet was launched on February 16, with its testnet having processed 95 million transactions, positioning itself as a game changer in scalability performance, with heavyweight institutions like Circle already on board. Starknet's Nums application chain, as a Layer 3 gaming innovation, showcases the future of modular design.

Meanwhile, although Sonic EVM is not an Ethereum Layer 2, its Mobius mainnet launch on February 27 as the first SVM chain expansion of Solana has attracted a lot of attention, achieving 10,000 TPS and bringing $47.6 million in funding to Aave within a few days. These initiatives indicate that Layer 2 projects are increasingly investing in technology rather than just hype.

Vitalik Buterin commented on February 19, emphasizing that Ethereum needs to clarify its positioning amidst increasing competition. He advocated for Layer 2 to take a leading role in scalability (such as a 17x transaction boost) 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.

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 investment should be approached with caution.