February's Public Chain Insights: DeFi Surge and Layer 2 Evolution
March 2024, [email protected]
Data Source: Public Chain Research — Footprint Analytics
February’s crypto market exhibited strong bullish dynamics, driven by significant over 45% value increases in Bitcoin and Ether. This upbeat trend extended to altcoins, with the top 10 tokens witnessing a surge in value by over 25%.
The period stood out for progress in data storage and significant strides in blockchain sectors such as AI, DePin, Web3 Gaming, and Meme, with DeFi, particularly Uniswap and EigenLayer, leading the advancements.
Additionally, Ethereum’s Layer 2 solutions, notably Blast and Starknet, along with the Bitcoin Layer 2 ecosystem, with Merlin Chain leading, experienced marked advancements.
Data for this report was obtained from Footprint Analytics’ public chain research page — an easy-to-use dashboard containing the most vital stats and metrics to understand the public chain industry, updated in real-time.
Crypto Macro Overview
February’s significant uptick in the cryptocurrency market was influenced by multiple factors. The introduction of new spot Bitcoin ETFs in the U.S. attracted massive inflows, totaling $6 billion in February alone, signaling strong investor confidence and a shift toward cryptocurrency as a viable store of value. Additionally, the anticipation of Ethereum’s network upgrade in March and Bitcoin’s halving event in April contributed to the price gains.
However, broader market dynamics, such as inflation concerns and Federal Reserve policies, could pose challenges to continued growth. The uptick in inflation in February signals a risk that anticipated interest rate cuts in the U.S. may be delayed until later this year or beyond.
As February concluded, the total market cap of public chain cryptocurrencies escalated to $1.9 trillion, a 42% increase from January. Bitcoin, Ethereum, BNB Chain, and Solana spearheaded this growth, commanding market shares of 64.0%, 21.4%, 3.3%, and 3.0%, respectively.
Bitcoin and Ether both showcased impressive growth, with Bitcoin surging 46.5% to close at $62,404, crossing $60,000 for the first time since Q4 2021 and nearing its all-time high by just 9%. Ether slightly outpaced Bitcoin, climbing 48.1% to end the month at $3,383.
With Bitcoin and Ether experiencing token value increases exceeding 45%, alternative tokens also showed robust performance. The top 10 tokens, on average, saw their values rise by over 25%. Besides, Arweave (AR) enjoyed a significant surge of 205.8%, while Stacks (STX) and Filecoin (FIL) witnessed increases of 88.3% and 57.1%, respectively.
The data storage domain has seen notable advancements over the past month. On February 14th, Arweave, a decentralized data storage solution, announced the official launch of Arweave AO and its plans to unveil a test network by February 27th. Arweave AO is set to boost blockchain scalability through a modular architecture, facilitating higher transaction throughput and parallel processing capabilities.
Furthermore, the decentralized file storage network Filecoin disclosed its integration with Solana on February 16th. This collaboration aims to enhance the accessibility of Solana’s block history using Filecoin’s infrastructure.
When it comes to TVL, the public chain sector finished February at $97.7 billion, with Bitcoin’s TVL soaring to $2.05 billion, a 600% increase from January. This surge was propelled by Bitcoin’s Layer 2 advancements and booming staking activities, notably Merlin’s Seal.
February marked a bullish trend across blockchain sectors, notably in AI, DePin, Web3 Gaming, Meme, and especially DeFi.
The Uniswap Foundation’s proposal on February 23 to adjust its fee mechanisms to favor UNI token holders, known as the “fee switch,” was met with enthusiasm, albeit cautious, propelling the UNI token’s value and boosting the DeFi sector.
In addition, EigenLayer, an Ethereum-based protocol introducing restaking, drew attention with a $100 million investment from a16z Crypto. This surge in funding elevated its TVL above $10 billion, ranking EigenLayer among the top three DeFi protocols.
Buoyed by a thriving crypto market and the anticipation of potential Ethereum ETFs, Ethereum Layer 2 solutions have seen significant increases in TVL. Arbitrum and Optimism are at the forefront, with their TVL surging by 31.1% and 22.1%, respectively.
Blast’s TVL soared by 106.4% to $2.8 billion. The platform’s Big Bang dApp Competition has been a resounding success, leading to a spike in online activity and prompting some dApps to migrate to Blast from other blockchains. Besides, Blast confirmed its mainnet launch on March 1.
Starknet introduced its Provisions Program, the most extensive token distribution event in the crypto space, which fueled online engagement on the network and propelled its TVL by almost 900%.
The Bitcoin Layer 2 ecosystem is increasingly impossible to overlook. February saw Merlin Chain’s dynamic expansion drive Bitcoin’s DeFi TVL beyond the $2 billion mark. This surge was primarily fueled by the explosive popularity of Merlin’s Seal, a fair launch campaign for Merlin Chain. The Lightning Network, Stacks, and Rootstock also stand out as frontrunners in Bitcoin’s Layer 2 solutions.
A new wave of projects is making strides within Bitcoin’s Layer 2 frameworks, emphasizing compatibility with EVM smart contracts. This development broadens Bitcoin’s utility far beyond payments, with platforms like Conflux, Bitfinity, and Botanix leading the charge in diversifying the applications and functionalities accessible on Bitcoin’s network.
Gaming
February’s gamer rankings showed Ronin, BNB Chain, and Polygon leading in user activity, with shares of 29.1%, 13.4%, and 13.1%, respectively. Ethereum, BNB Chain, and Ronin topped the charts in trading volume.
Blockchain platforms are seizing opportunities for growth through collaboration with content creators. In response to local regulatory challenges, South Korean Web3 game developers actively pursue global markets for their blockchain-based games. A notable development in this context is Oasys, offering both Layer-1 and Ethereum-based Layer-2 networks for game developers. Oasys recently announced strategic partnerships with South Korean game developer Com2uS, and shortly thereafter with South Korean internet giant Kakao’s Web3 gaming division Metabora SG.
Expanding the ecosystem through mutual growth between games and blockchain platforms is another strategic approach. Pixels, a Web3 farming game, shifted from Polygon to Ronin in late October 2023, leveraging Ronin’s superior interoperability and marketing support. This move propelled the game’s visibility and on-chain activity, with Pixels registering over 1.5 million on-chain interactions in February, nearing the 1 million user milestone. This growth benefits Ronin, highlighting the mutual advantages of such partnerships.
For more data insights, you can get it from the February Web3 gaming report: Web3 Gaming: A February 2024 Snapshot of Growth and Challenges.
NFT
In February, Ethereum maintained its lead in the NFT market, recording a trading volume of $814.3 million and capturing 97.1% of all transactions, slightly adjusting its market share upwards despite a lower volume than in January. On the other hand, Polygon experienced a notable decline, with its trading volume dropping to $20.4 million from January’s $106.0 million, causing its market share to sharply decrease from 10.4% to 2.4%.
Ethereum’s unique user count(wallets) declined to 149.9K from January’s 163.3K, yet its market share grew from 42.7% to 46.9%. Polygon also saw a reduction, with its user base falling to 129.2K, bringing its market share to 40.4%. Meanwhile, BNB Chain’s market share modestly increased, reaching 9.7% with 30.9K users.
For more insights into the February NFT market, you can check the NFT report from Footprint Analytics: February 2024: Crypto Climbs, NFT Adjusts.
Investment & Funding
In February, the public chain sector witnessed 11 funding events, successfully raising $146.6 million. This marks a significant uptick in both the number and volume of investments compared to January.
In the Layer 1 domain, Flare secured $35 million in a private round led by Kenetic and Aves Lair, positioning itself as a data-centric network dedicated to advancing smart contract protocols and pricing oracles.
On the Layer 2 front, Karak emerged prominently, raising $48 million in its Series A round, the largest funding event of the month. Karak introduces a cutting-edge risk management framework tailored for blockchain, Web3, and global financial ecosystems. Additionally, Ethereum Layer 2 solutions like AltLayer and LightLink achieved fundraising success.
The momentum extends to Bitcoin Layer 2 platforms, with QED Protocol, Citrea, and Merlin Chain each securing new investments in February. The interest in Bitcoin’s scaling solution is growing.
What’s New?
- Sei Labs is planning to launch the Sei V2 upgrade in the first half of 2024.
- Web3 infrastructure Particle Network has announced that its first Launchpad will feature the Bitcoin Layer 2 network Merlin Chain token MERL.
- Bitcoin Cats announces its Bitcoin Layer 2 1CAT Chain testnet launch on February 23.
- Layer 1 blockchain Nibiru Chain plans to launch its public mainnet in March 2024.
- DeFi protocol Frax Finance launched its Layer 2 Fraxtal, an EVM-compatible rollup built on the OP Bedrock stack.
- Circle, the issuer of USDC, has announced the discontinuation of support for its stablecoin on the TRON blockchain.
- Klaytn and Finschia blockchains will merge to become Asia’s “largest Web3 network” through an initiative called “Project Dragon” within Q2 2023.
Footprint Analytics is a blockchain data solutions provider. It leverages cutting-edge AI technology to help analysts, builders, and investors turn blockchain data and combine Web2 data into insights with accessible visualization tools and a powerful multi-chain API across 20+ chains for NFTs, GameFi, and DeFi.
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