The report aims to provide a non-technical audience with an interpretation of the key trends in the Web3 industry for the second quarter of 2025, focusing on decentralized finance (DeFi), layer 2 networks, zero-knowledge technologies (zkRollup), public chain competition, and market investment dynamics.
Current State of DeFi Protocols: Funds Flowing Back and Yields Stabilizing. Entering the second quarter of 2025, the decentralized finance (DeFi) market shows signs of steady recovery. The total locked value (TVL) of the entire market grew approximately 3.3% month-on-month in April, reaching about $95 billion. This growth is partly due to positive changes in the macro environment, such as the U.S. releasing clearer or more lenient signals regarding regulations for DeFi platforms, which has somewhat boosted market confidence. Additionally, the stablecoin market also slightly expanded by about 1%, with USDC's market share rising to 26.2%, surpassing USDT for the first time. For ordinary users, the increase in TVL usually indicates more funds flowing into DeFi protocols, reflecting a restoration of user interest and trust in this field. From the perspective of DeFi locked value distribution among major public chains, Ethereum still dominates, with its DeFi locked value accounting for nearly half of the total market. The remaining shares are divided among public chains such as Solana, BNB Chain, Tron, and Layer 2 networks like Base and Arbitrum. The shares of Layer 2 and cross-chain protocols are gradually increasing, showing that users and funds are progressively shifting to these more efficient networks.
Proportion of DeFi Locked Value Among Major Public Chains (May 2025). DeFi locked value on Ethereum still accounts for nearly half, with the remainder shared by public chains such as Solana, BNB Chain, and Tron. Layer 2s like Base and Arbitrum also hold a place, indicating that the proportion of cross-chain and layer 2 protocols in DeFi is gradually increasing. The "Other" section in the chart includes the total locked value of chains such as Polygon that are not listed separately.
Specifically regarding mainstream DeFi protocols, the flow of funds shows differentiation. The established lending protocol Aave maintains a leading position with a TVL of about $17.9 billion, up 2.9% in the past 30 days, indicating sustained demand for its lending services. However, the Ethereum staking protocol Lido, which performed strongly last year, saw its TVL decline nearly 20% this quarter, falling to about $14.5 billion. This may be related to the stabilization of Ethereum staking yields and the diversion effects from emerging staking protocols like ether.fi. In terms of yields, the annual percentage rate (APR) for mainstream stablecoin lending remains stable in the range of 2%-5%, while riskier strategies like decentralized exchange market making offer higher double-digit APRs to attract liquidity.
One notable growth case this quarter is the new protocol Spark within the MakerDAO ecosystem. From April to May, Spark's TVL surged by about 95%, reaching approximately $4.3 billion. This rapid growth of Spark is primarily attributed to its integration with MakerDAO's stablecoin DAI and its innovative real-world asset tokenization (RWA) investment strategy. For instance, Spark invested $1 billion this quarter to purchase low-risk assets such as on-chain government bonds, bringing its related RWA portion of total locked value to $2.4 billion. By connecting with real-world assets like U.S. government bonds, Spark can provide users with stable returns close to 5%. This attempt to bring traditional financial assets into DeFi not only offers users a more stable investment choice but also enhances the risk resistance of DeFi protocols, attracting substantial funds seeking low-risk returns.
Overall, this quarter, the DeFi market presents a trend of "funds flowing back and seeking stable returns." The rebound in TVL indicates that market confidence is recovering, while the rationalization of yields (especially in areas like stablecoin lending and Ethereum staking) helps to reduce the risks of excessive speculation, making DeFi more attractive to a broader range of ordinary users. The fluctuations among mainstream protocols and the emergence of new protocols signal that DeFi is gradually transitioning from the early stage of wild growth to maturity, with user experience and trust likely to improve further. For non-technical users, the future use of DeFi for financial management may resemble traditional financial products more closely: yields are relatively predictable, and risks are becoming more manageable.
Layer 2 Ecosystem: The Rise of Low-Fee Networks. Layer 2 networks continued to maintain a high-speed growth momentum this quarter. Layer 2 can be understood as an "acceleration layer" built on top of main chains like Ethereum, significantly reducing fees and increasing processing speed through batch processing of transactions, while still relying on the main chain for security. The most notable change this quarter is the substantial increase in user activity on Layer 2: data shows that the daily average transaction fee revenue on the Ethereum mainnet has dropped to about 13.7% of the total Ethereum ecosystem, meaning nearly 86% of transaction fees are occurring on Layer 2 networks. This shift intuitively reflects that a large number of users and transactions are migrating from the relatively expensive and slow Ethereum mainnet to the faster and cheaper Layer 2 networks. For ordinary users, the most direct experience is that transferring or trading on Layer 2 has become both cost-effective and fast.
Among the major Layer 2 networks, Arbitrum and Optimism remain market leaders, but there have been some new changes in the ecological landscape this quarter. Arbitrum has accumulated a large user base through early airdrop incentives and a rich application ecosystem, with active addresses exceeding 1.1 million at one point during the quarter. However, Coinbase's newly launched Base network performed strongly this quarter, slightly surpassing Arbitrum in TVL to become the new single-chain locked value champion. As of May, Base's locked value was approximately $2.83 billion, while Arbitrum's was about $2.11 billion, with the latter's TVL declining by 16% over the past 30 days. This indicates that some funds are flowing from Arbitrum to emerging networks like Base. The success of Base is partly due to Coinbase's large user base backing it, and partly due to a slowdown in user growth after the early airdrop excitement for Arbitrum diminished. Meanwhile, Optimism, through its "Superchain" strategy, is forming alliances with networks based on its technology stack, like Base, to collectively enhance ecological competitiveness. Additionally, ZK Rollup-type Layer 2s such as zkSync Era and StarkNet have also attracted more attention this quarter; while their locked values and user scales are still not comparable to optimistic Rollups, they are growing rapidly and showing strong momentum.
The core appeal of Layer 2 lies in its extremely low transaction fees and rapid transaction confirmations. Currently, the average transaction fee on the Ethereum mainnet is about several dollars, while on Arbitrum it is only around $0.10, approximately $0.14 on Optimism, and even as low as $0.02 on the latest ZK Rollups like zkSync Era. This significant fee difference is the primary driver for users to accelerate their migration to Layer 2.
Comparison of Average Transaction Fees for L1 and L2 (Q2 2025). The transaction costs on the Ethereum mainnet (L1, orange) are significantly higher than those on Arbitrum (blue), Optimism (red), and zkSync (green). The competition between Arbitrum and Optimism this quarter reflects the fierce competition in the Layer 2 market. Although the Arbitrum ecosystem remains active, fluctuations in market share indicate that all Layer 2 solutions are striving to lower user barriers and enhance user stickiness. For instance, the OP Stack standard, jointly promoted by Optimism and Base, aims to achieve seamless interoperability between different layer 2 networks, which is seen as the foundation for building a future "superchain." For users, this means that in the future, when using Ethereum-based applications, they may not need to worry about which layer 2 chain a specific application operates on, while still enjoying low fees and high speeds. Overall, the continuous growth in the number of Layer 2 users and the amount of funds, along with the entry of new players, is significantly improving the blockchain experience for ordinary users, making large-scale adoption of blockchain applications more realistic.
zkRollup Progress: Breakthroughs in Zero-Knowledge Technology and Ecological Growth.
This quarter, the zero-knowledge rollup (zkRollup) field also made significant progress. zkRollup is a Layer 2 solution that utilizes zero-knowledge proof technology to process transactions in batches, with its core advantages being the ability to achieve high throughput and low fees while completely ensuring the consistency and security of on-chain data through cryptographic methods. Although the current user scale and locked value of zkRollup do not yet match optimistic Rollups, its technological potential is highly regarded in the industry, and various project teams released several important updates in the second quarter. First, zkSync Era has proposed a new architectural vision called "Elastic Network" while enhancing the stability of the mainnet. This vision aims to support multiple parallel ZK chains to work together, further expanding Ethereum's throughput capacity through a modular approach. If this direction is successfully implemented, it is expected to significantly improve network processing capacity and lower fees in the future, ensuring users can have a smooth transaction experience even during network peaks. Meanwhile, as an Ethereum-compatible ZK Rollup, Polygon zkEVM has continued to optimize its performance and compatibility this quarter. Due to its high compatibility with the Ethereum Virtual Machine (EVM), Polygon zkEVM has begun to attract some DeFi projects for deployment, allowing users to seamlessly experience Ethereum applications on ZK Rollup using familiar tools like Metamask. This is especially user-friendly for non-technical backgrounds, as they do not need to learn new wallets or programming languages to enjoy the low-cost advantages brought by ZK Rollup.
Regarding StarkNet, the project team has announced a clear roadmap for 2025, with the second quarter focusing on supporting direct access for Ethereum wallets, integrating cross-chain communication protocol Hyperlane, and launching Bitcoin asset bridging functionality. This means that in the future, ordinary users on StarkNet will be able to use their accustomed wallets more conveniently and transfer assets between different blockchains. For example, through the upcoming Bitcoin bridge, users can expect to trade Bitcoin-pegged assets on StarkNet while enjoying the rich ecology of Ethereum DeFi and the low transaction fees of ZK Rollup. On the technical side, StarkNet is also developing a new proof system and fee market to further increase transactions per second and optimize network costs.
More breakthrough advancements include StarkNet successfully pushing L3 technology into practical stages and testing its capability to run large-scale game applications on a three-layer network. A mining simulation game ran continuously on L3 for 14 hours, achieving a processing speed of 400 transactions per second, and users were unaware of the underlying network switch during gameplay. This vividly demonstrates that ZK technology is not only applicable to financial applications but also shows great potential in scenarios requiring high-frequency interactions, such as gaming and social applications. Another noteworthy case is the educational application Focus Tree on StarkNet, which successfully attracted 180,000 new users in two weeks through a "learning rewards NFT" model, most of whom were first-time users of crypto technology, and at one point, this application accounted for 90% of StarkNet's daily trading volume. This indicates that if the application is well-designed, zkRollup can serve the general public in a "seamless" manner, allowing people to enjoy the conveniences brought by blockchain technology without realizing it.
Overall, this quarter, major zkRollup projects continued to iterate technically, and the ecological applications went from sporadic appearances to gradually becoming more robust, with user metrics also steadily growing. Zero-knowledge Rollup is regarded as one of the "ultimate forms" of blockchain scalability, and the ongoing technological advancements mean that in the future, the general public can expect to enjoy blockchain services that are close to internet application experiences without sacrificing security. For non-technical users, the maturity of zkRollup will bring a safer, more privacy-focused, and still inexpensive network environment, with scenarios such as private transactions and confidential identity verification expected to gradually materialize. The positive progress in the second quarter suggests that in the coming quarters and even in the next few years, the infrastructure of Web3 will become stronger, supporting more innovative applications.
Public Chain Competitive Landscape: Coexistence of Multiple Chains and Display of Individual Strengths.
In addition to Ethereum and its Layer 2s, the competition among public chains (Layer 1) also showed new patterns in the second quarter of 2025. Ethereum, as the oldest and most prosperous public chain, still holds the top position in terms of locked value and market capitalization. However, due to some user activities and transaction fees flowing to Layer 2, the growth rate of transaction volume on the Ethereum mainnet is relatively limited, and its market share in the total DeFi locked value even slightly declined in April. Nevertheless, Ethereum remains the "underlying hegemon" in the Web3 world due to its large developer community, mature application ecosystem, and highest security. Its future upgrade plans (such as data sharding Danksharding) also lay the foundation for its long-term development. For ordinary users, Ethereum represents the richest application choices and the highest security guarantees, while its high transaction fee issues are gradually being alleviated through Layer 2.
The Solana public chain achieved a strong rebound in the second quarter, showing impressive performance. Solana was affected by technical issues and the FTX incident in previous years, but this year it has regained a large amount of trading activity due to its high performance. In particular, in April, Solana experienced a trading boom in "meme coins," with the trading volume on decentralized exchanges (DEX) on-chain reaching industry-leading levels at one point. According to statistics, 95% of the non-stablecoin trading volume on Solana in April was driven by the speculation of various meme tokens. This wave of enthusiasm brought Solana's monthly DEX trading volume to $52.6 billion, briefly approaching Ethereum's monthly DEX trading volume. In terms of infrastructure, the Solana team also conducted a core network upgrade, improving throughput performance by 4%. Additionally, favorable macro factors pushed the price of SOL tokens up approximately 15% this quarter, including the launch of Canada's first SOL spot ETF and potential follow-up in the U.S. market. These developments indicate that Solana is gradually emerging from its past shadows, regaining user favor with its fast and low-cost technology advantages. For users, the trading experience on Solana is extremely smooth (with second-level confirmations and nearly free transaction fees), making it particularly suitable for high-frequency trading and NFT minting scenarios. The meme coin craze this quarter, while speculative and bubble-like, also thoroughly validates Solana's capability to handle large-scale transactions technologically.
The BNB Chain (BSC) maintained a stable development trend this quarter. Its locked value slightly increased by about 2.6%, reaching around $5.5 billion. The DeFi and gaming application communities on the BNB Chain remain active, with ongoing support from Binance bringing in new users. The Lorentz upgrade in April improved network performance, while a multi-million dollar liquidity incentive program further attracted developers. Additionally, some innovative projects chose to launch on the BNB Chain, such as the synthetic dollar stablecoin Ethena's USDe, which went live on the BNB Chain this quarter. This indicates that the BNB Chain has found a balance between speed, fees, and ecological maturity, making it one of the popular choices for new project deployments. For users, BSC offers a similar experience to Ethereum but with lower transaction fees and high recognition in the Asian market due to Binance's brand influence.
In the realm of emerging public chains, Sui and Aptos, which launched their main nets last year, are the focus of attention. These two public chains based on the Move language have been carrying high expectations as "next-generation high-performance chains." This quarter, Sui had its first remarkable performance: in April, the price of SUI tokens rose by 54% month-on-month. This increase was mainly driven by positive news, such as Grayscale launching a SUI trust and the Sui Foundation collaborating with Mastercard in the virtual card space. These events significantly enhanced Sui's recognition among developers and institutions, while the daily active addresses and locked value on the Sui network also reached new highs (TVL of approximately $1.2 billion, with a 30-day growth of 4.6%). In contrast, Aptos remained relatively calm this quarter, showing steady ecological progress without explosive growth. It is worth mentioning that both chains pursue high throughput and security from a technical perspective, claiming to handle thousands of transactions per second, suggesting that users can expect a balance of speed and security in their future application experiences on these chains. However, emerging public chains face challenges as their ecosystems are still in the early stages, with relatively few applications, requiring time to build developer and user communities.
In the competitive landscape of multi-chain, each public chain is leveraging its own technological and ecological advantages to fill market gaps. Solana attracts high-frequency trading and NFT applications with extreme speed; Ethereum, despite high transaction fees, remains strong due to its largest ecosystem and Layer 2 support; the BNB chain attracts users with a user-friendly approach and support from Binance; Sui and Aptos attract new developers and applications through technological innovations. For users, the direct benefit of this competition is increased choice—different needs can select different chains. More importantly, competition among public chains encourages each chain to continuously improve performance, reduce fees, and enrich applications, ultimately benefiting users. The development of some cross-chain bridges and multi-chain wallets has already allowed users to transfer assets and use applications across different chains almost seamlessly. For instance, many mobile wallets can now manage assets across multiple chains simultaneously, and many GameFi players do not even need to know which underlying chain is being used in the game. This pattern of coexistence and mutual development of multiple chains has become increasingly apparent this quarter, and it is expected to deepen in the next quarter, with public chains continuously launching new features and vying for developers to bring users a better experience and more diverse application scenarios.
Market Dynamics: Financing Boom, Airdrop Trends, and New Narratives.
The Web3 market in the second quarter of 2025 is equally vibrant in terms of macro capital flows and community hotspots. In terms of financing, the momentum of several large financings from the first quarter continued, with investment enthusiasm remaining high in the second quarter. Some key tracks received focused attention from capital: statistics in April showed that a total of 64 blockchain projects globally completed financing, with total amounts exceeding $1.75 billion. This financing includes both infrastructure projects and applications aimed at ordinary consumers. The largest single financing case this quarter was Securitize, which received a $400 million investment. Securitize is a platform focused on real-world asset tokenization (RWA), and this funding was provided by Mantle Treasury to launch an on-chain index fund and collaborate with traditional financial giants like BlackRock and KKR. This case clearly indicates that traditional financial institutions are actively investing in the Web3 space, particularly showing strong interest in RWA, a field that connects real-world assets with blockchain.
The RWA track performed particularly well this quarter: by mid-March, the total locked value of RWA protocols first surpassed $10 billion, becoming the fastest-growing segment of the year, with a TVL increase of about 30% year-to-date and a year-on-year growth of 140%. Taking the BUIDL fund supported by BlackRock as an example, its on-chain scale has reached $1.4 billion, growing 140% within 30 days. DeFi giant MakerDAO has also invested substantial funds into government bonds and other RWA assets through protocols like Spark. The rapid development of RWA signifies that blockchain is establishing substantial connections with traditional assets and funds, breaking the previously relatively closed situation of the crypto world. For ordinary users, this means that in the future they may be able to invest in products supported by real-world assets (such as government bonds, real estate shares) through Web3 platforms, enjoying stable returns while reducing the risks brought by crypto market volatility.
In addition to institutional financing, venture capital and mergers and acquisitions also shone this quarter. For example, the decentralized social platform Farcaster completed a $150 million Series A financing this year, valuing the company at $1 billion. This financing, led by a well-known venture capital firm, marks the rise of the SocialFi (social finance) sector. SocialFi aims to combine social networks with token economies, allowing users to earn rewards or governance rights through social interactions. Farcaster's financing indicates that capital is optimistic about the prospects of decentralized social, believing it could become the next breakout point for Web3. Similarly, in the gaming and metaverse sector, there were also large financing cases this quarter: a blockchain gaming platform Zentry raised $140 million, showing that the GameFi sector remains attractive. These events suggest that more interesting and practically valuable decentralized social applications and games may emerge in the future. For instance, posting and liking on a decentralized social platform could earn token rewards, or earning tradable items in on-chain games—these are the application scenarios that SocialFi and GameFi are striving to realize. The financing dynamics this quarter indicate that the industry is actively investing resources to turn these concepts into reality.
In the trend of airdrops, community enthusiasm remains high. Many users this quarter are keen on "airdrop hunting," actively experiencing new projects that have yet to issue tokens, hoping to receive free token rewards in the future. Popular potential airdrop projects include Meteora, Hyperliquid, Kaito, etc., which typically set testnet tasks or specific usage thresholds to filter out genuine early users. Notably, project teams are also continuously upgrading airdrop rules to prevent "wool-pulling" bots and multi-account cheating (Sybil attacks). For example, project teams are beginning to require users to complete a certain number of interactions, hold related NFTs, or undergo identity verification to ensure that token rewards can be distributed to genuine community contributors. Among projects that have already issued airdrops, Optimism has conducted multiple rounds of airdrops (the first round covered about 249,000 addresses, and subsequent rounds rewarded hundreds of thousands of addresses); Arbitrum issued 12.75% of its token supply to approximately 624,000 early users in a single event in 2023. The value of these airdrops is often substantial; for example, during Uniswap's 2020 airdrop, each user received 400 UNI, which at that time had a value of over a thousand dollars. Thus, airdrops have attracted a lot of attention but have also brought speculation and cheating issues. On-chain analysis shows that about 21.8% of Arbitrum's airdrop tokens were ultimately obtained through Sybil attacks. Project teams are continuously improving strategies to reduce cheating, such as employing more complex behavioral analysis and identity verification methods.
For non-technical users, airdrops can be seen as an early marketing activity where "participation offers a chance to receive rewards." This quarter's trend shows that while airdrops remain an effective means for projects to cold-start and attract attention, "targeted airdrops" are becoming increasingly common. The continuous enthusiasm for airdrops also reflects the unique early participation culture of the Web3 community: users are willing to try new projects, while projects reward early supporters with tokens, forming a win-win relationship.
Finally, some emerging narratives gradually took shape this quarter, expected to lead the next phase of market hotspots. In addition to the aforementioned RWA (on-chain real-world assets) and SocialFi (social + finance), several other noteworthy concepts have emerged: DePIN (Decentralized Physical Infrastructure Network): It refers to the construction and sharing of physical world infrastructure networks through blockchain incentive mechanisms, such as IoT devices, communication base stations, energy networks, etc. A typical example is the Helium network, which rewards users with tokens for deploying IoT hotspots. Since the beginning of this year, the DePIN concept has gained renewed attention, with relevant projects receiving some funding and community discussions. This suggests that ordinary users may have the opportunity to earn crypto rewards in the future by participating in building physical networks, further extending blockchain application scenarios into a broader real world. Privacy Computing and Compliance: With changes in the regulatory environment and heightened user awareness of privacy protection, some projects are beginning to explore solutions for on-chain privacy protection that comply with regulatory requirements. This quarter, projects focused on introducing sensitive information such as identity verification and credit scoring onto the chain while ensuring that information is not leaked through technologies like zero-knowledge proofs. Although this type of narrative has a high technical threshold, once breakthroughs are achieved, it will significantly expand the application space of Web3 in areas that require high privacy protection, such as finance and government affairs. In summary, the Web3 industry in the second quarter of 2025 has achieved growth in data aspects (increases in TVL, users, and trading volume), as well as breakthroughs in concepts and applications (new narratives like RWA and SocialFi emerging). This combination of "quantitative accumulation leading to qualitative change" indicates that the industry is moving towards a more mature and mainstream direction.
Summary and Outlook for the Next Quarter. Reviewing this quarter, we can summarize the "what happened" as follows: funds are flowing back and seeking stable returns, Layer 2 and zkRollup technologies continue to improve, providing better user experiences, and multiple public chains are showcasing their strengths in competition to meet different user needs, with active market investment and financing generating new narratives. These changes are significant because they point to a core trend—the Web3 is accelerating its integration into the mainstream world. The active participation of traditional institutions, the gradual on-chain of real assets, and ordinary users engaging with and using blockchain technology through more acceptable means like gaming and social interactions all indicate that crypto technology is moving from a relatively niche geek circle to a broader public stage. Looking forward to the third quarter of 2025, we can anticipate several directional movements.
Macroeconomic Environment and Policy Impacts: If the global macro economy continues to improve and major economies clarify or become more friendly toward regulatory policies for the crypto industry, it may attract more traditional large institutions and capital into the Web3 field. For example, whether there will be national-level blockchain infrastructure investments, or more countries introducing policies supporting crypto innovation, will directly impact the flow of funds and market confidence in the industry.
Ethereum Upgrades and Layer 2 Ecosystem Evolution: The Ethereum community may propose new testing plans or optimization proposals around key upgrades like Danksharding (data sharding) in the next quarter, which will lay the foundation for further development of Layer 2. Meanwhile, interoperability among Layer 2s is expected to make more progress, or new important ZK Rollup networks (such as Scroll) may launch their mainnet, potentially sparking a new round of user interaction and potential airdrop opportunities.
New Highlights in Public Chain Competition: Can Solana maintain its growth momentum after the meme coin craze and attract more real applications and users? Will emerging public chains like Aptos and Sui have heavyweight applications launch, triggering user growth? Additionally, the progress of the transformation plan for Polygon, a well-established secondary public chain aimed at evolving from a single L1 to a multi-chain hub for Ethereum, is also worth close attention. If the transformation is successful, it will have profound implications for its token economy and ecological landscape.
Deepening the Integration of DeFi and Traditional Finance: In the next quarter, we may see more real cases of traditional financial giants collaborating with DeFi protocols, such as banks providing on-chain deposit and loan services through DeFi protocols and issuing tokenized bonds. Once such integrations are implemented, they will significantly expand the influence of DeFi while also raising higher requirements for compliance and technical integration capabilities.
Implementation and Validation of New Narratives: The RWA sector may see the first successful cases, allowing ordinary users to genuinely feel their value, such as certain tokenized fund products starting to regularly distribute earnings to holders, making their holding experience similar to traditional bonds. In the SocialFi space, there may be successful applications like a "decentralized social circle" or "content creation as mining" that break into the mainstream, attracting a large number of non-crypto-native users. If these emerging narratives can be realized and produce practical utility in the next quarter, it will inject new growth momentum into the entire industry.
In summary, as we enter the second half of 2025, the Web3 industry is expected to continue its "breaking out" journey, gradually moving from primarily serving users within the crypto circle to serving a broader range of digital consumers.
