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 settlement layer, thanks to a proposed funding package of up to $147.5 million from Tether and its partners. The package, which includes up to $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. Previously, the platform utilized Circle's USDC as its settlement layer.
The rescue package combines a revenue-linked credit facility, ecosystem grants, and loans to market makers, with a portion of trading revenue and committed capital directed towards a recovery pool aimed at covering roughly $295 million in user losses over time. The funding comes after a North Korea-linked group infiltrated Drift Protocol, posing as a quantitative trading firm for about six months before carrying out the exploit on April 1. Drift's governance token, DRIFT, has lost approximately 70% of its value since the exploit. The incident led to criticism of Circle for its handling of the situation, with some arguing that the company could have moved faster to blacklist wallets and freeze funds to prevent the attacker from moving assets.
However, Circle's approach is to freeze USDC wallets only when directed by law enforcement or courts, not in real-time during hacks, due to legal risks. In contrast, USDT has a history of freezing assets linked to hacks or other illicit activities.
As the largest decentralized perpetual futures exchange on Solana, with over 175,000 users and roughly $150 billion in cumulative trading volume, Drift's transition to USDT is seen as a significant development in the stablecoin market. The competition between USDT and USDC is intensifying, with Circle's USDC gaining share due to regulatory alignment and growing institutional use.
While USDT still leads in terms of supply, USDC's transaction volume has outpaced Tether's in recent months. With the new funding package, Tether plans to fund fee reductions and user incentives tied to Drift's transition to USDT, while extending liquidity support to designated market makers to bolster trading depth at relaunch. The move positions USDT at the center of Drift's trading infrastructure, providing a pathway to restore user funds and resume operations.