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

In February 2025, the blockchain market experienced significant adjustments, presenting challenges for both mature networks and emerging public chains. Bitcoin demonstrated resilience, further solidifying its dominant position, while most chains, including Solana, Avalanche, and Ethereum, faced substantial declines. Nevertheless, development activities in the public chain sector remained vibrant: the Berachain mainnet launch, Base infrastructure upgrades, and the launch of Uniswap's Layer 2 were highlights of the month.

Market Overview

The market saw a significant pullback in February: Bitcoin fell from $98,768 to $84,177, a decline of 14.8%, while Ethereum suffered even greater losses, dropping from $3,065 to $2,216, a decrease of 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 the market signals are complex, with investors oscillating between optimism and concerns triggered by security vulnerabilities. Market sentiment has deteriorated, and risk appetite has declined, particularly in speculative areas like Memecoin. 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 acutely.

Regulatory and Policy Trends

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 February 21 resulted in losses of up to $1.5 billion, setting a record for the largest loss in cryptocurrency history, raising new security concerns and rapidly shifting market sentiment. Meanwhile, the SEC's stance has softened, pausing investigations into several well-known companies and dropping its appeal on the "dealer rule." The bipartisan GENIUS Act (the American Stablecoin 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 turmoil. The Memecoin craze driven by Argentine President Milei's related tokens has quickly cooled off due to negative news, leading to a sharp decline in valuation and a significant drop in trading volume. This shift suggests that the market is retreating from high-risk assets.

Layer 1 Ecosystem

Layer 1 public chains are generally under pressure, with the total market capitalization declining by 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 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 issued 80 million BERA tokens, adopting a "liquidity proof" model—an innovative staking method that converts liquidity into network security. Following a $100 million funding 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 worth paying attention to.

The Memecoin craze for Solana has clearly cooled off. High-profile failure cases, such as the token related to Argentine President Milei, have damaged market confidence, leading to a significant decline in trading volumes on certain DEX platforms. While Memecoins are not going to 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 and 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 well, with a slight decrease in TVL of 9.3% to $150 million. Small platforms faced greater pressure, with SatoshiVM down 31.5%, MAP Protocol down 29.6%, and Interlay down 27.4%.

The downturn in the sector aligns with the views of a prominent 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 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 resilient than projects that rely solely on momentum.

Ethereum Layer 2

Ethereum L2 TVL decreased by 23.4% to $14 billion. A well-known 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 platform ($2.1 billion) to third place. 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 engagement. Unichain's mainnet was launched on February 16, having previously processed 95 million transactions on its testnet, and is positioned as a game changer for scaling performance, with several 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 a lot of attention, achieving 10,000 TPS and bringing $47.6 million in funding to a certain DeFi protocol within a few days. These initiatives indicate that Layer 2 projects are increasingly investing in technology rather than just gimmicks.

A well-known Ethereum developer commented on February 19, emphasizing that Ethereum needs to clarify its positioning amidst increasing competition. He advocates for Layer 2 to take a leading role in scalability (such as a 17x transaction increase) and interoperability, noting that they have evolved from "advanced multi-signatures" 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 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.