Following a devastating exploit that resulted in the loss of over $270 million in user assets, Drift Protocol has announced a proposed funding package of up to $147.5 million from Tether and its partners. The funds, which include $127.5 million from Tether and $20 million from other partners, are intended to support user recovery and facilitate the reboot of the platform as a USDT-based perpetual futures exchange on Solana. This move marks a significant shift away from Circle's USDC, which was previously used as the settlement layer.
The rescue package comprises a revenue-linked credit facility, ecosystem grants, and loans to market makers, with a portion of trading revenue and committed capital being directed towards a recovery pool to cover approximately $295 million in user losses over time. The exploit, which was linked to a North Korean group, occurred on April 1 and resulted in the loss of over $270 million.
Drift's governance token, DRIFT, has since lost around 70% of its value. The incident sparked controversy surrounding Circle's response to the exploit, with some critics arguing that the company could have acted more swiftly to freeze funds and prevent the attacker from transferring assets. In contrast, Tether has a history of freezing assets linked to hacks and 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 USDT still holding a wide lead in terms of market supply, but USDC gaining ground in terms of transaction volume. With the new funding package, Tether plans to support fee reductions and user incentives tied to Drift's transition to USDT, as well as provide liquidity support to designated market makers to bolster trading depth at relaunch.