In the aftermath of a devastating North Korean-led 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. This strategic move aims to support user recovery and reboot the platform as a USDT-based perpetual futures exchange on Solana, having previously utilized Circle's USDC. The funding package comprises 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 to cover approximately $295 million in user losses over time.
The exploit, which occurred on April 1, resulted in losses exceeding $270 million and led to a significant decline in the value of Drift's governance token, DRIFT. Circle, the issuer of USDC, faced criticism for its handling of the exploit, with some 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 proactive approach to freezing assets linked to illicit activities. As the largest decentralized perpetual futures exchange on Solana, with over 175,000 users and cumulative trading volume of roughly $150 billion, Drift's transition to USDT is poised to have a significant impact on the stablecoin market. The competition between stablecoin issuers is intensifying, with Circle's USDC gaining ground on Tether's USDT in recent months.
However, with this new funding package, Tether aims to reinforce its position by supporting Drift's transition to USDT and providing incentives for users, while also extending liquidity support to market makers.