Insights on the Public Chain Industry in February 2025: Challenges and Innovations in the Market Pullback

In February 2025, the blockchain market experienced significant adjustments, posing challenges to various public chains. Despite the overall market decline, Bitcoin performed relatively steadily, further consolidating its dominant position. Meanwhile, the majority of chains, including Ethereum, Solana, and Avalanche, saw substantial declines. However, development activities in the public chain sector did not come to a halt, with several important projects such as the Berachain mainnet, Base infrastructure upgrades, and the launch of a Layer 2 solution for a well-known DEX becoming highlights of the month.

Market Overview

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

This pullback follows the bull market in January, but the market signals are complex, with investors oscillating between optimism and concerns raised by safety risks. Market sentiment has deteriorated, risk appetite has declined, especially in areas with higher speculation. Globally, the North American market is showing cautious optimism due to policy changes, while the Asia-Pacific market has felt the impact of hacking attacks more intensely.

Regulatory and Policy Trends

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, 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, which raised new security concerns and quickly shifted market sentiment. Meanwhile, the stance of regulators has softened, pausing investigations into several major trading platforms and dropping appeals regarding 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 turbulence. The speculative frenzy driven by tokens related to a certain country's president quickly cooled due to associated 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.

Layer 1 Public Chain Performance

Layer 1 public chains are generally under pressure, with the total market capitalization declining by 20.8% to $2.3 trillion. Bitcoin's dominance has risen from 71.3% to 74.2%, while Ethereum's share has shrunk from 14.0% to 11.9%. A well-known public chain's share has slightly increased to 3.7%, but Solana's share has dropped from 4.0% to 3.3% after a price crash of 36.3%.

Litecoin went against the trend, rising 1.0% to $128.7, while Solana (-36.3%), Avalanche (-35.7%), and others lagged behind.

The total value locked in 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 strongly, quickly rising 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, adopting a "liquidity proof" 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 could redefine how public chains balance growth and stability, making Berachain a project worth watching.

The speculation frenzy around Solana has clearly cooled down. High-profile failures have damaged market confidence, leading to a significant decline in trading volumes across multiple DEX platforms. While these speculative tokens are unlikely to disappear and can be seen as digital collectible cards, their peak frenzy may be over, and traders are starting to pay more attention to fundamentals rather than hype.

Bitcoin Layer 2 and Sidechain Development

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.

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

The downturn in this field is consistent with predictions from industry experts: "As initial enthusiasm wanes, over two-thirds of existing Bitcoin Layer 2 projects will disappear within three years." 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 enduring than projects that rely solely on momentum.

Ethereum Layer 2 Ecosystem

Ethereum L2 TVL decreased by 23.4% to $14 billion. A well-known L2 platform maintains its lead with a TVL of $4.5 billion (down 33.4%), while another platform rises to second place with a TVL of $4.2 billion (down 10.6%), pushing the third place (at $2.1 billion) to third. Polygon zkEVM surged by 104.1% to $300 million, becoming a rare highlight this month.

A certain L2 platform has launched Flashblocks (faster transaction confirmations), Appchains (customized L3), and smart wallet sub-accounts, aiming to maintain user stickiness. Another emerging L2 launched its mainnet on February 16, having previously processed 95 million transactions on its testnet, positioning itself as a game changer in scalability performance, with several 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 funds to 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 Ethereum founder commented on February 19, emphasizing that Ethereum needs to clarify its positioning amid increasing competition. He advocated for Layer 2 to play 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 a robust network. 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 Dynamics

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-VM Layer 2 that connects Ethereum and Solana.

Overall, in February 2025, the public chain industry is facing market adjustments while also demonstrating a vibrant capacity for continuous innovation. Although there are challenges in the short term, technological advancements and the emergence of new projects are injecting new momentum into the long-term development of the industry.