Development Trends of the Public Chain Industry in February 2025: Challenges and Innovations Amid Market Adjustments

In February 2025, the blockchain market underwent a significant adjustment, which had a substantial impact on various public chain networks. Despite this, Bitcoin still demonstrated strong resilience against declines, further solidifying its market dominance. In contrast, most public chains, including Ethereum, Solana, and Avalanche, experienced considerable decreases.

However, it is worth noting that even amid the overall market downturn, development activities in the public blockchain sector have not stagnated. Highlights of this month include the successful launch of the Berachain mainnet, upgrades to the Base infrastructure, and Uniswap's new attempts at Layer 2.

Market Overview

The market showed a significant pullback trend in February: Bitcoin fell from $98,768 to $84,177, a decrease of 14.8%; Ethereum performed even worse, dropping from $3,065 to $2,216, a decline of up to 27.7%. In the last week of the month, panic stemming from security incidents spread, further intensifying market sell-off pressure.

The recent pullback closely follows January's bull market, but market signals are complex and ever-changing, leaving investors oscillating between optimistic sentiment and concerns raised by safety risks. The deterioration of market sentiment has led to a reduction in risk appetite, especially in highly speculative areas. Globally, the North American market exhibits a certain cautious optimism due to policy changes, while the Asia-Pacific market has felt the impact of hacking incidents more profoundly.

Regulatory and Policy Changes

The U.S. government's executive order on cryptocurrencies focuses on self-custody wallets and the development of stablecoins, providing rare policy clarity for the industry. However, a major hacking incident on February 21 resulted in losses of up to $1.5 billion, setting a new record for the largest single loss in cryptocurrency history, triggering a new wave of security concerns and rapidly shifting market sentiment.

At the same time, the attitude of the U.S. Securities and Exchange Commission (SEC) has softened to some extent, pausing investigations into some major cryptocurrency trading platforms and dropping its appeal against the "dealer rule." The bipartisan "U.S. Stablecoin National Innovation and Establishment Act" (GENIUS Act) further refines the regulatory framework for stablecoins, indicating that the regulatory environment in the U.S. is evolving towards a more friendly direction.

Investor behavior reflects this turbulent situation. The speculative frenzy driven by tokens associated with a certain country’s president quickly cooled due to a series of negative news, leading to a sharp drop in valuation and a significant shrinkage in trading volume. This shift indicates that the market is retreating from high-risk assets.

Performance of Layer 1 Public Chains

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%. 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 has seen a slight increase of 1.0% to $128.7, while Solana (-36.3%) and Avalanche (-35.7%) have performed poorly.

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, adopting a "liquidity proof" model, which is an innovative staking method that converts liquidity into network security. Following a $100 million financing round in 2024, this month's airdrop and governance rights have sparked market enthusiasm. This novel approach could redefine how public chains balance growth and stability, making Berachain a project worth noting.

The speculative token craze of Solana has clearly cooled down. Some high-profile failures have damaged market confidence, leading to a significant decline in trading volumes on some decentralized exchanges. Although these types of tokens will not completely disappear and can be seen as digital collectibles, 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 Layer 2 and sidechains has decreased by 24.5% from $2.7 billion to $2.1 billion. One platform leads with a TVL of $460 million (down 42.0%), followed by two emerging platforms with $350 million and $320 million, respectively. Another platform performed relatively well, only dropping 7.9% to $220 million.

Among medium-sized platforms, an emerging project performed well, with TVL slightly declining by 9.3% to $150 million. Small platforms, on the other hand, are under greater pressure, with several projects dropping by more than 25%.

The downturn in this field aligns with the views of a co-founder of a well-known project at an industry conference: "As the initial enthusiasm wanes, over two-thirds of existing Bitcoin Layer 2 projects will disappear within three years." He predicts that the market will face severe challenges, and the downturn in February indicates that consolidation may have already begun. Looking ahead, platforms that can demonstrate actual utility may prove to be more resilient than projects that rely solely on momentum.

Ethereum Layer 2

Ethereum Layer 2 TVL decreased by 23.4% to $14 billion. A major platform maintains its leading position 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. An emerging project surged by 104.1% to $300 million, becoming a rare highlight of the month.

A well-known platform has launched Flashblocks (faster transaction confirmations), Appchains (customized L3), and smart wallet sub-accounts, aiming to maintain user engagement. Another new project 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 already involved. The application chain of a well-known project, as a Layer 3 gaming innovation, showcases the future of modular design.

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

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 the lead in scalability (such as a 17-fold increase in transactions) and interoperability, noting that they have evolved from "advanced multisignatures" into a powerful network. Although he did not directly comment on certain projects, their 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 Situation

Financing activities have slowed down, with a total of 6 transactions completed in February, amounting to $32.4 million. One new project raised $13.5 million for its EVM-MoveVM hybrid chain, which is scheduled to launch in the first quarter of 2025. Another project secured $8 million in funding for the development of a multi-VM Layer 2 connecting Ethereum and Solana.

Despite the overall sluggish performance of the market, the public chain sector continues to innovate and develop. With continuous technological advancements and a gradually clearer regulatory environment, the industry is expected to welcome new growth opportunities in the future.