Drift Secures $148 Million in Funding to Recover from Exploit and Transition to USDT

Drift Protocol, a recent victim of a North Korean exploit, has announced plans to relaunch with USDT as its settlement layer after securing a substantial funding package of up to $147.5 million from Tether and its partners. The package, which includes $127.5 million from Tether and $20 million from other partners, is designed to support user recovery and reboot the platform as a USDT-based perpetual futures exchange on Solana. Prior to the exploit, Drift utilized Circle's USDC as its settlement layer. The funding package combines a revenue-linked credit facility, ecosystem grants, and loans to market makers, with a portion of trading revenue and committed capital allocated to a recovery pool aimed at covering approximately $295 million in user losses over time. This development comes after a North Korea-linked group infiltrated Drift Protocol, resulting in an exploit of over $270 million on April 1. Drift's governance token, DRIFT, has since lost around 70% of its value. The incident drew criticism towards Circle for its handling of the situation, with some arguing that the company could have acted faster to blacklist wallets and freeze funds. However, Circle's approach is to only freeze USDC wallets when directed by law enforcement or courts, citing legal risks. In contrast, USDT has demonstrated a greater ability to freeze funds linked to hacks or illicit activities. As the largest decentralized perpetual futures exchange on Solana, with over 175,000 users and $150 billion in cumulative trading volume, Drift's transition to USDT marks a significant development in the stablecoin market. The competition between stablecoins is intensifying, with Circle's USDC gaining ground on Tether's long-standing dominance. While USDT still maintains a significant lead, Circle's transaction volume has surpassed Tether's in recent months. The new funding package will also enable Tether to support fee reductions and user incentives tied to Drift's transition to USDT, as well as provide liquidity support to designated market makers. This move positions USDT at the center of Drift's trading infrastructure, providing a pathway to restore user funds and resume operations.