February 2025 Public Chain Industry Dynamics: Challenges and Innovations in Market Fluctuation

In February 2025, the blockchain market experienced significant adjustments, posing challenges to various public chains. Bitcoin demonstrated strong resilience, while other mainstream chains generally faced declines. Nevertheless, the pace of development in the public chain sector did not slow down, with highlights this month including the launch of the Berachain mainnet, upgrades to Base infrastructure, and the introduction of Uniswap's Layer 2 solutions.

Market Overview

In February, the market saw a significant pullback: Bitcoin fell from $98,768 to $84,177, a decrease of 14.8%; Ethereum experienced an even larger drop, falling from $3,065 to $2,216, down 27.7%. In the last week of the month, panic triggered by security concerns spread, intensifying selling pressure.

This pullback follows the bullish market in January, but market signals are complex, causing investors to oscillate between optimism and safety concerns. Market sentiment has worsened, and risk appetite has declined, especially in speculative areas like Memecoins. Globally, the North American market shows cautious optimism due to policy changes, while the Asia-Pacific market feels the impact of hacker attacks more strongly.

Changes in Regulatory Environment

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 and raising new security concerns, causing market sentiment to shift rapidly. Meanwhile, the SEC's stance has softened, pausing investigations into several major trading platforms 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 a certain country's president-related tokens quickly cooled down due to negative news, leading to a sharp drop in valuation and a significant shrinkage in trading volume. This shift suggests that the market is retreating from high-risk assets.

Development 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 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, increasing by 1.0% to $128.7, while Solana (-36.3%), Avalanche (-35.7%), and others performed poorly.

DeFi TVL fell 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 its 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 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 Memecoin craze of Solana has clearly cooled down. High-profile failures have undermined market confidence, leading to a significant decline in trading volumes on some DEX platforms. Although Memecoins will not disappear and can be seen as digital collectible cards, their peak frenzy may have passed, 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 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, only falling 7.9% to $220 million.

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

The slump in the field aligns with the views of industry experts: "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 industry's downturn in February suggests that consolidation may have already begun. Looking ahead, platforms that can demonstrate real utility may prove to be more resilient than projects that rely solely on momentum.

Ethereum Layer 2 Development

Ethereum L2 TVL decreased by 23.4% to $14 billion. A certain trading 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 Optimism ($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, aimed at maintaining user engagement. Unichain's mainnet launched on February 16, having previously processed 95 million transactions on its testnet, positioning itself as a game changer for 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 significant attention, achieving 10,000 TPS and bringing $47.6 million in funding to a DeFi platform 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 advocated for Layer 2 to take a leading role in scalability (such as a 17-fold transaction improvement) and interoperability, pointing out that they have evolved from "advanced multi-signature" to a powerful network. 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 Status

Financing activities have slowed down, with a total of 6 transactions amounting to $32.4 million completed in February. 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.