Public Chain Industry February Report: Innovations and Challenges Amid Market Pullback

In February 2025, the blockchain market underwent a significant adjustment, posing challenges to both mature networks and emerging public chains. Bitcoin demonstrated resilience, further solidifying its dominant position, while most chains, including Solana, Avalanche, and Ethereum, experienced substantial declines. Nevertheless, development activity in the public chain sector did not stagnate: the Berachain mainnet launch, Base infrastructure upgrades, and the rollout of Uniswap's layer two network became 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 experienced an even larger drop, 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 the market signals are complex, with investors oscillating between optimism and concerns raised by security risks. Market sentiment has deteriorated, and risk appetite has decreased, especially in more speculative areas. Globally, the North American market shows cautious optimism due to policy changes, while the Asia-Pacific market feels the impact of security events more acutely.

Regulatory and Policy Trends

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, a significant security incident on February 21 resulted in losses of $1.5 billion, setting a record for the largest loss in cryptocurrency history, raising new security concerns, and swiftly changing market sentiment. Meanwhile, the SEC's stance has softened, suspending investigations into several crypto firms and dropping its appeal against the "dealer rule." The bipartisan "Stablecoin 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 speculative frenzy driven by the tokens related to a certain country's president quickly cooled off due to associated negative news, leading to a sharp drop in valuation and a significant contraction 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 a total market cap 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 share of a certain chain slightly rose 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 lagged behind.

The total locked value (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 as a strong contender, quickly rising to sixth place with a TVL of $3.2 billion after the mainnet launch on February 6. The chain issued 80 million BERA tokens and adopted a "liquidity proof" model—an innovative staking method that converts liquidity into network security. Following a large-scale financing round in 2024, this month's airdrop and governance incentives have stimulated 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 speculative frenzy around Solana has clearly cooled down. High-profile failures have damaged market confidence, leading to a significant decline in trading volumes across multiple decentralized exchanges. Although speculative tokens are unlikely to disappear and can be viewed as digital collectibles, their peak frenzy may have passed, with traders beginning to focus more on fundamentals rather than hype.

Bitcoin Layer 2 Networks and Sidechains

The TVL of Bitcoin's second-layer network 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, with only a 7.9% drop to $220 million.

Among mid-sized platforms, Merlin performed well, with TVL decreasing slightly by 9.3% to $150 million. Smaller platforms, however, are under greater pressure, with SatoshiVM down 31.5%, MAP Protocol down 29.6%, and Interlay down 27.4%.

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

Ethereum Layer 2 Network

The TVL of Ethereum Layer 2 networks has decreased by 23.4% to $14 billion. Arbitrum maintains its leading position with a TVL of $4.5 billion (down 33.4%), while a certain platform has risen 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 $300 million, becoming a rare highlight this month.

A certain platform has launched fast transaction confirmation, customized three-layer network, and smart wallet sub-accounts, aimed at maintaining user stickiness. Unichain's mainnet was launched on February 16, having previously processed a cumulative total of 95 million transactions on its testnet, positioning itself as a game changer in scalability performance, with several heavyweight institutions joining. The Nums application chain of Starknet, as a three-layer gaming innovation, showcases the future of modular design.

At the same time, although Sonic EVM is not an Ethereum Layer 2 network, its Mobius mainnet launched on February 27 as the first SVM chain expansion for Solana, attracting a lot of attention, achieving 10,000 TPS and bringing $47.6 million in funding to a certain DeFi platform within a few days. These initiatives indicate that Layer 2 projects are investing more heavily in technology rather than just hype.

The founder of Ethereum commented on February 19, emphasizing that Ethereum needs to clarify its positioning in the face of growing competition. He urged layer two networks to take the lead in scalability (such as a 17x increase in transactions) and interoperability, pointing out that they have evolved from "advanced multi-signature" to 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 within 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-VM Layer 2 network connecting Ethereum and Solana.