Following a significant exploit, Drift Protocol has announced plans to relaunch using Tether's USDT as its settlement layer, after securing a substantial funding package of up to $147.5 million from Tether and its partners. The package, which includes $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, replacing 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 to cover approximately $295 million in user losses over time. The funding comes after a North Korea-linked group infiltrated Drift Protocol, resulting in losses of over $270 million on April 1.
The incident led to criticism of Circle for not halting the money transfer, with some arguing that the company could have moved faster to blacklist wallets and freeze funds. In response, Circle's CEO, Jeremy Allaire, stated that the company only freezes USDC wallets when directed by law enforcement or courts. The move to USDT is seen as a strategic shift, with Tether's stablecoin offering more flexibility in freezing funds 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 is expected to have significant implications for the stablecoin market. The competition between USDT and USDC is intensifying, with Circle's USDC gaining market share due to regulatory alignment and growing institutional use. However, USDT still maintains a significant lead, with approximately $185.5 billion in supply compared to USDC's $78.6 billion.
The new funding package will also enable Tether to support fee reductions and user incentives tied to Drift's transition to USDT, while providing liquidity support to designated market makers to bolster trading depth at relaunch.