In the aftermath of a recent exploit linked to North Korea, Drift Protocol has announced plans to relaunch with Tether's USDT as its primary settlement layer, following the securing of a substantial funding package worth up to $147.5 million from Tether and its partners. The funding, which includes $127.5 million from Tether and $20 million from other partners, is structured to facilitate user recovery from the April 1 exploit and to support the rebooting of the platform as a USDT-based perpetual futures exchange on Solana. Previously, Drift utilized Circle's stablecoin, USDC, as its settlement layer. The rescue package is a combination of a revenue-linked credit facility, ecosystem grants, and loans to market makers, with a portion of the trading revenue, alongside committed capital, being directed towards a recovery pool aimed at covering approximately $295 million in user losses over time.
This development comes after a North Korea-linked group infiltrated Drift Protocol by posing as a quantitative trading firm for about six months before executing an exploit that resulted in losses exceeding $270 million on April 1. The governance token of Drift, DRIFT, has seen its value decline by about 70% since the exploit occurred. The crypto community criticized Circle for its perceived reluctance to halt the transfer of funds following the exploit, with the attacker transferring around $232 million in USDC from Solana to Ethereum using Circle's cross-chain transfer protocol. Critics argued that Circle could have acted more swiftly to blacklist wallets and freeze funds to prevent or slow down the movement of assets by the attacker.
However, Circle chose not to take such actions due to potential legal risks. Circle's CEO, Jeremy Allaire, later explained that the company only freezes USDC wallets upon direction from law enforcement or courts, and not in real-time during hacks, as part of its strategy to closely align with regulators and institutions. In contrast, USDT has demonstrated a greater ability to freeze funds linked to hacks or illicit activities in the past.
As the largest decentralized perpetual futures exchange on Solana, with over 175,000 users and a cumulative trading volume of approximately $150 billion, Drift offers a range of services including perpetuals, spot trading, lending, borrowing, and cross-margin trading. The competition in the stablecoin market is intensifying, with exchanges, fintech companies, and traditional financial institutions competing to control the on-ramps, liquidity, and settlement layers that underpin digital asset markets. While USDT still maintains a significant lead in the stablecoin market, with roughly $185.5 billion in supply compared to USDC's $78.6 billion, according to CoinDesk data, USDC has been gaining share on the back of regulatory alignment and growing institutional use. In recent months, Circle's transaction volume has outpaced Tether's, as its market share expands.
With the new funding package, Tether plans to support fee reductions and user incentives tied to Drift's transition to USDT, as well as extend liquidity support to designated market makers to enhance trading depth at the time of relaunch. Drift believes this move positions USDT at the center of its trading infrastructure, providing a pathway to restore user funds and resume operations.