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

In February 2025, the blockchain market experienced significant adjustments, impacting various public chain networks to different degrees. Bitcoin demonstrated strong resilience against declines, further solidifying its market dominance, while most public chains, including Solana, Avalanche, and Ethereum, faced substantial downturns. Nevertheless, development activity in the public chain sector remained active, with highlights of the month including the launch of the Berachain mainnet, upgrades to the Base infrastructure, and Uniswap's introduction of Layer 2 solutions.

Market Overview

The market experienced a significant correction in February: Bitcoin fell from $98,768 to $84,177, a decline of 14.8%; Ethereum faced an even larger decline, dropping from $3,065 to $2,216, a decrease of 27.7%. In the last week of the month, panic stemming from security concerns spread, further intensifying the selling pressure in the market.

This adjustment follows the bullish market trend in January, but the market signals are complex, with investors oscillating between optimistic expectations and concerns raised by security vulnerabilities. Market sentiment has deteriorated, and risk appetite has decreased, especially in more speculative areas such as Memecoins. Globally, the North American market shows a cautiously optimistic attitude due to policy changes, while the Asia-Pacific market has felt the impact of hacking incidents more profoundly.

Policy & Regulatory Changes

The U.S. government's executive order on cryptocurrencies, with a focus on self-custody wallets and stablecoin development, provides rare policy clarity for the industry. However, the hacking of a trading platform on February 21, which caused a loss of $1.5 billion, setting a record for the largest single loss in cryptocurrency history, triggered a new round of security concerns, and market sentiment quickly turned. At the same time, the SEC softened its stance, suspended its investigation of several major cryptocurrency companies and dropped its appeal against the "dealer rules". The bipartisan support of the GENIUS Act (the U.S. Stablecoin National Innovation Guidance and Establishment Act) further improves the regulatory framework for stablecoins, showing that the U.S. regulatory environment is becoming more friendly.

Investor behaviour reflects this volatile situation. The Memecoin craze, fueled by Argentine President Milley-related tokens, has quickly cooled down due to negative news, valuations have shrunk significantly, and trading volumes have shrunk significantly. This shift suggests that the market is withdrawing from risky assets.

Performance of Layer 1 Public Chains

Layer 1 public chains are generally under pressure, with a total market capitalization declining by 20.8% to $2.3 trillion. Bitcoin's dominance rose from 71.3% to 74.2%, while Ethereum's share decreased from 14.0% to 11.9%. The share of a certain trading platform's chain slightly increased to 3.7%, but Solana's share fell from 4.0% to 3.3% after a price drop of 36.3%.

Litecoin bucked the trend and edged up 1.0% to $128.7, while Solana (-36.3%), Avalanche (-35.7%) and others underperformed.

The total value locked (TVL) in DeFi 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 and adopted a "Proof of Liquidity" model - an innovative staking method that transforms liquidity into network security. Following a $100 million funding round in 2024, this month's token 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 of Solana has clearly cooled down. High-profile failures, such as the token associated with Argentine President Milei, have damaged market confidence, leading to a significant decline in trading volumes on certain decentralized exchanges. Although Memecoins are not likely to disappear completely 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 mere speculation.

Bitcoin Layer 2 and Sidechains

The TVL of Bitcoin L2 and sidechains shrank by 24.5% from $2.7 billion to $2.1 billion. Core leads the way with a TVL of $460 million (down 42.0%), followed by Bitlayer ($350 million) and BSquared ($320 million). BOB was the standout performer, falling only 7.9% to $220 million.

Among the mid-cap platforms, Merlin performed better, with TVL edging down 9.3% to $150 million. Smaller platforms came under more pressure, with SatoshiVM down 31.5%, MAP Protocol down 29.6%, and Interlay down 27.4%.

The slump 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 the 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 prove actual utility may be more durable than projects that rely solely on momentum.

Ethereum Layer 2 Development

Ethereum L2 TVL fell by 23.4% to $14 billion. A trading platform maintained its leading position with a TVL of $4.5 billion (down 33.4%), while Base climbed to second place with a TVL of $4.2 billion (down 10.6%), pushing another major platform ($2.1 billion) to third. Polygon zkEVM surged against the trend 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 enhance user engagement. Unichain's mainnet was launched on February 16, having processed 95 million transactions on its testnet, positioning itself as a game changer in scalability performance, with several heavyweight institutions already on board. Starknet's Nums application chain, as a Layer 3 gaming innovation, showcases the future potential of modular design.

Sonic EVM, meanwhile, is not an Ethereum Layer 2, but its Mobius mainnet launch on February 27 as Solana's first SVM chain extension attracted a lot of attention, achieving 10,000 TPS and bringing in $47.6 million in funding for a DeFi platform in a matter of days. These initiatives show that Layer 2 projects are investing more in technology than just at the conceptual level.

The founder of Ethereum commented on February 19, emphasizing that Ethereum needs to clarify its positioning amid increasing competition. He advocates for Layer 2 to take a leading role in scalability (such as a 17x increase in transactions) and interoperability, noting that they have evolved from "advanced multisignatures" 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

Financing activity slowed, with six transactions totalling $32.4 million completed in February. Mango Network has raised $13.5 million for its EVM-MoveVM hybrid chain, which is scheduled to launch in the first quarter of 2025. Fluent Labs has raised $8 million in funding to develop a multi-virtual machine Layer 2 that connects Ethereum and Solana.

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