Following a significant exploit that resulted in the loss of over $270 million in client assets, Drift Protocol has announced plans to relaunch with Tether's USDT as its new settlement layer, thanks to a proposed funding package of up to $147.5 million from Tether and its partners. The funding package, which includes a revenue-linked credit facility, ecosystem grants, and loans to market makers, aims to support user recovery and reboot the platform as a USDT-based perpetual futures exchange on Solana. This move marks a shift away from Circle's USDC, which was previously used as the settlement layer.
A portion of the trading revenue will be allocated to a recovery pool to cover roughly $295 million in user losses over time. The exploit, which was linked to a North Korea-based group, led to a 70% decline in the value of Drift's governance token, DRIFT. The incident also sparked criticism towards Circle for its handling of the exploit, with some arguing that the company could have acted faster to freeze funds and prevent the attacker from transferring the assets. In contrast, Tether has a history of freezing assets linked to hacks or illicit activities.
As the largest decentralized perpetual futures exchange on Solana, Drift boasts over 175,000 users and $150 billion in cumulative trading volume. The platform's transition to USDT is seen as a strategic move to restore user funds and resume operations. The funding package also includes plans to reduce fees and provide user incentives tied to the transition, as well as extend liquidity support to market makers. This development is part of a larger landscape of intensifying competition in the stablecoin market, with exchanges, fintechs, and traditional financial institutions vying for control of on-ramps, liquidity, and settlement layers.