Drift Protocol, recently victimized by a North Korean exploit, is set to relaunch with Tether's USDT as its core settlement layer after obtaining $147.5 million in funding from Tether and its partners. This financial package, comprising $127.5 million from Tether and $20 million from other partners, is structured to support the recovery of user funds 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 rescue package includes 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. The exploit, linked to a North Korea-based group, resulted in losses exceeding $270 million on April 1. Drift's governance token, DRIFT, has seen a significant decline of about 70% in value since the incident.
The funding comes as a response to the recent challenges faced by Drift, including the movement of $232 million in USDC from Solana to Ethereum by the attacker, using Circle's cross-chain transfer protocol. Critics argued that Circle could have acted faster to freeze funds and blacklist wallets, but the company cited legal risks as the reason for not taking immediate action. In contrast, USDT has demonstrated a more agile approach to freezing assets 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 shift in the stablecoin landscape.
The competition among stablecoins is intensifying, with USDC gaining ground against USDT's long-standing dominance, driven by regulatory alignment and growing institutional adoption. With USDT still leading in terms of supply, Circle's USDC has seen its transaction volume surpass that of USDT in recent months, expanding its market share. The new funding package will also facilitate fee reductions and user incentives tied to Drift's transition to USDT, along with extended liquidity support to designated market makers, aiming to bolster trading depth at relaunch. This move positions USDT at the core of Drift's trading infrastructure, providing a pathway for the restoration of user funds and the resumption of operations.