Following a significant exploit, Drift Protocol has announced plans to relaunch with Tether's USDT as its primary settlement layer, backed by a substantial funding package of up to $147.5 million from Tether and its partners. The investment, comprising $127.5 million from Tether and $20 million from other partners, aims to facilitate user recovery and reboot the platform as a USDT-based perpetual futures exchange on Solana, replacing the previously used USDC. The funding package is structured as a combination of revenue-linked credit facilities, ecosystem grants, and loans to market makers, with a portion of trading revenue and committed capital allocated to a recovery pool to cover approximately $295 million in user losses over time. This development comes after a North Korea-linked group infiltrated Drift Protocol, resulting in losses of over $270 million on April 1, and a subsequent 70% decline in the value of Drift's governance token, DRIFT.
The incident sparked controversy surrounding Circle's handling of the exploit, with critics arguing that the company could have acted more swiftly to freeze funds and prevent the attacker from transferring assets. In contrast, Tether has demonstrated a more agile approach to freezing funds linked to 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 is poised to significantly impact the stablecoin market.
The move intensifies the competition between USDT and USDC, with Tether seeking to maintain its dominance and Circle's USDC gaining ground through regulatory alignment and institutional adoption. With the new funding package, Tether plans to support fee reductions, user incentives, and liquidity support for Drift's transition to USDT, cementing USDT's position at the core of Drift's trading infrastructure and paving the way for the platform's recovery and relaunch.