Public chain industry research report in February 2024: DeFi takes off, Bitcoin Layer 2 emerges suddenly

Author: stella@footprint.network

Data source: Footprint Analytics public chain research page

In February, the cryptocurrency market showed strong upward momentum, mainly due to the sharp increase in the value of Bitcoin and Ethereum by more than 45%. This optimistic trend has also affected other tokens, with the top ten tokens all achieving more than 25% growth in value.

Significant progress has been made in the field of blockchain data storage. At the same time, multiple sub-fields in the blockchain field, such as AI, DePin, Web3 games and Meme, have obvious rotation trends, especially the DeFi sector, represented by Uniswap and EigenLayer. The project leads the innovation of the industry.

In addition, Ethereum's Layer 2 solutions, including Blast and Starknet, as well as the Bitcoin Layer 2 ecosystem led by Merlin Chain, have made breakthroughs.

The data in this report comes from the public chain research page of Footprint Analytics. This page provides an easy-to-use dashboard containing the most critical statistics and indicators for understanding the public chain field, updated in real time.

Crypto Market Overview

The significant rise in the cryptocurrency market in February was driven by a combination of factors. Among them, the U.S. spot Bitcoin ETF attracted up to $6 billion in capital inflows in February, a figure that highlights investors' firm confidence in cryptocurrencies as an effective store of value. In addition, market expectations for the Ethereum Cancun upgrade in March and the Bitcoin halving event in April have further pushed up prices. Together, these factors have provided strong support for the rise in the cryptocurrency market.

However, broader market dynamics, such as inflation concerns and Federal Reserve policy, may pose challenges to sustained growth. The increase in inflation in February means that the expected interest rate cut in the United States may be postponed until later this year or even later, which undoubtedly creates uncertainty for the continued growth of the cryptocurrency market.

Public chain overview

As February comes to an end, the total market value of public chain cryptocurrencies has soared to US$1.9 trillion, an increase of 42% compared to January. In this wave of growth, Bitcoin, Ethereum, BNB Chain and Solana have undoubtedly played a leading role, with their market shares reaching 64.0%, 21.4%, 3.3% and 3.0% respectively.

​Data Source: Market value share of public chain tokens - Footprint Analytics

Both Bitcoin and Ethereum are showing significant growth. Among them, Bitcoin rose strongly, with an increase of as much as 46.5%. The closing price at the end of the month reached US$62,404, breaking through the US$60,000 mark for the first time since the fourth quarter of 2021, and is only 9% away from its historical high. Ethereum performed even more impressively, with an increase slightly exceeding that of Bitcoin, reaching 48.1%, and closing at the end of the month at $3,383.

​Data Source: Bitcoin and Ethereum Prices - Footprint Analytics

Led by more than 45% growth in the value of Bitcoin and Ethereum tokens, other tokens also showed strong performance. The average value of the top ten tokens increased by more than 25%. In addition, Arweave (AR)’s growth was particularly significant, reaching 205.8%; while Stacks (STX) and Filecoin (FIL) also achieved growth of 88.3% and 57.1% respectively.

Data source: Public chain token market capitalization and price - Footprint Analytics

Over the past month, significant progress has been made in the field of blockchain data storage. On February 14, the distributed data storage solution Arweave officially launched Arweave AO and plans to launch a test network by February 27. Arweave AO will improve the scalability of the blockchain through a modular architecture, thereby promoting higher transaction throughput and parallel processing capabilities.

In addition, the distributed storage network Filecoin announced the completion of integration with Solana on February 16. This collaboration aims to improve the accessibility of Solana’s historical data using Filecoin’s infrastructure.

In terms of TVL, the public chain industry ended February at $97.7 billion. Among them, Bitcoin’s TVL soared to $2.05 billion, an increase of 600% compared to January. This significant growth is mainly due to the progress of Bitcoin Layer 2 technology and the vigorous development of staking activities, especially the performance of the Merlin's Seal project.

Data source: Public chain TVL - Footprint Analytics

In February, the blockchain industry showed a strong upward trend, with sections such as AI, DePin, Web3 games, Meme and DeFi rotating. The DeFi sector has finally recovered strongly, with projects such as Uniswap and EigenLayer performing well.

On February 23, the Uniswap Foundation proposed a proposal to adjust its fee mechanism to support UNI token holders. Although this move, known as the "fee switch", was somewhat controversial, it still triggered a positive response from the market. This has promoted the increase in the value of UNI tokens and boosted the overall performance of the DeFi industry.

In addition, the Ethereum project EigenLayer has attracted much attention for introducing a re-staking function and received a US$100 million investment from a16z Crypto. This capital injection helped EigenLayer’s TVL jump to over $10 billion, placing it among the top three DeFi projects.

Layer 2

With the cryptocurrency market booming and anticipation of a potential Ethereum ETF, Ethereum Layer 2 solutions have seen significant growth in TVL. Among them, Arbitrum and Optimism continued to lead, with their TVL increasing by 31.1% and 22.1% respectively.

Blast's TVL also saw impressive growth, surging 106.4% to $2.8 billion. The platform’s Big Bang dApp competition was a huge success, significantly boosting network activity and prompting some dApps to migrate to Blast from other blockchains. In addition, Blast has confirmed that its mainnet will be officially launched on March 1.

Starknet launched its Provisions Program, the largest token airdrop in the crypto space to date, significantly boosting activity on the network, increasing its TVL by nearly 900%.

Data source: Ethereum Layer 2 Overview - Footprint Analytics

The Bitcoin Layer 2 ecosystem cannot be ignored. In February, Merlin Chain’s rapid expansion successfully pushed Bitcoin’s DeFi TVL to exceed the $2 billion mark. This significant growth is mainly due to the popularity of Merlin Chain's fair launch event Merlin's Seal. At the same time, Lightning Network, Stacks and Rootstock are also emerging as Bitcoin Layer 2 solutions.

In addition, a new wave of projects is making significant progress in Bitcoin's Layer 2 space, all of which emphasize compatibility with EVM smart contracts. This development trend will greatly expand the use of Bitcoin, making it no longer limited to payment functions. Projects such as Conflux, Bitfinity, and Botanix are leading this change, working to diversify applications and functionality on the Bitcoin network.

Blockchain Games

The game rankings in February show that Ronin, BNB Chain and Polygon performed well in terms of user activity, occupying 29.1%, 13.4% and 13.1% of the market share respectively. In terms of transaction volume, Ethereum, BNB chain and Ronin are at the forefront, showing strong market performance.

Data source: Proportion of active game players on the public chain - Footprint Analytics

Public chains are seizing growth opportunities through in-depth cooperation with content creators. Facing local regulatory challenges, South Korea's Web3 game developers are actively turning their attention to the global market to find broader development space for their blockchain games. As a leader in this trend, Oasys not only provides Layer 1 network, but also launches Layer 2 network based on Ethereum to provide game developers with diversified technical support. Recently, Oasys announced a strategic cooperation with Com2uS, a well-known Korean game developer, and then joined hands with Metabora SG, the Web3 game department of Korean Internet giant Kakao.

In addition, expanding the ecosystem through mutual growth between games and blockchain platforms is another measure for public chains to gain growth. Web3 game pixels will be migrated from Polygon to Ronin at the end of October 2023, taking full advantage of Ronin's excellent interoperability and marketing support. This shift has significantly increased the game’s popularity and on-chain activity. In February alone, Pixels achieved more than 1.5 million on-chain interactions, and the number of users is approaching the 1 million milestone. This growth trend has undoubtedly had a positive impact on Ronin, highlighting the mutual benefits and win-win results brought about by the cooperation between the two parties.

NFT

In February, Ethereum continued to hold the top spot in the NFT market, with its transaction volume reaching US$810 million, accounting for 97.1% of the entire market transaction volume. Although this number is down compared to January, Ethereum’s market share has increased slightly. At the same time, Polygon's performance was not satisfactory. Its trading volume fell sharply from US$110 million in January to US$20.4 million, and its market share shrank sharply from 10.4% to 2.4%.

Data source: Public chain monthly NFT transaction volume - Footprint Analytics

The number of unique users of Ethereum (ie, the number of wallets) dropped from 163,000 in January to 150,000 in February. However, its market share increased from 42.7% to 46.9%. Polygon's number of users also declined, falling to 129,000, causing its market share to drop to 40.4%. At the same time, the BNB chain’s market share increased modestly by 9.7%, and its number of users reached 31,000.

Public chain investment and financing situation

In February, a total of 11 financing events occurred in the public chain industry, successfully raising US$150 million. Compared with January, both the number and scale of investments showed significant growth.

​2024 Public chain financing event in February

In the Layer 1 space, Flare has raised $35 million in a private equity round led by Kenetic and Aves Lair. Flare positions itself as a data-centric network focused on promoting the development of smart contract protocols and pricing oracles.

In the field of Ethereum Layer 2, Karak performed particularly well. Its Series A financing amount reached US$48 million, becoming the largest financing event of the month. Karak launches a cutting-edge risk management framework for blockchain, Web3, and the global financial ecosystem. Additionally, Ethereum Layer 2 solutions like AltLayer and LightLink have also successfully received funding.

This momentum also extends to Bitcoin Layer 2 platforms, with QED Protocol, Citrea and Merlin Chain all receiving new investments in February. This shows the market’s growing interest in Bitcoin scaling solutions.

Highlights of this month

• Sei Labs plans to launch the Sei V2 upgrade in the first half of 2024.
• Web3 infrastructure service provider Particle Network announced that its first Launchpad platform will introduce the token MERL of the Bitcoin Layer 2 network Merlin Chain.
• The Bitcoin Cats project successfully launched the Bitcoin Layer 2 solution 1CAT Chain test network.
• Layer 1 blockchain project Nibiru Chain plans to launch a public mainnet in March 2024.
• Decentralized finance protocol Frax Finance successfully launched its Layer 2 solution Fraxtal, which is built on OP Bedrock and is compatible with EVM.
• Circle, the issuer of stablecoin USDC, decided to stop supporting its stablecoin on the TRON blockchain.
• Two major blockchain projects, Klaytn and Finschia, announced that they will merge through the "Project Dragon" plan in the second quarter of 2023, aiming to create Asia's largest Web3 network.