Following a significant exploit that resulted in the loss of over $270 million in client assets, Drift Protocol has announced a proposed funding package of up to $147.5 million from Tether and other partners. This investment will facilitate the recovery of user funds and support the relaunch of the platform as a USDT-based perpetuals DEX on Solana, replacing Circle's USDC as its settlement layer. The funding package, which includes a revenue-linked credit facility, ecosystem grants, and loans to market makers, aims to cover roughly $295 million in user losses over time. A portion of trading revenue will be directed to a recovery pool to achieve this goal.
The recent exploit, linked to a North Korean group, has had a significant impact on Drift's governance token, DRIFT, which has lost approximately 70% of its value. The incident has also sparked controversy surrounding Circle's response to the exploit, with some critics arguing that the company could have acted faster to freeze funds and prevent the attacker from transferring assets.
In contrast, Tether has a history of swiftly freezing assets 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 each stablecoin issuer vying for control of the on-ramps, liquidity, and settlement layers that underpin digital asset markets.
With this new funding package, Tether plans to support fee reductions and user incentives tied to Drift's transition to USDT, while providing liquidity support to designated market makers to enhance trading depth at relaunch.