Following a recent exploit that saw a North Korean group infiltrate its system, Drift Protocol has announced plans to relaunch with Tether's USDT as its settlement layer, backed by a proposed $147.5 million funding package from Tether and its partners. The package, which includes up to $127.5 million from Tether and $20 million from other partners, is structured to support user recovery and reboot the platform as a USDT-based perpetual futures exchange on Solana.
Previously, the platform utilized Circle's USDC as its settlement layer. The rescue package combines revenue-linked credit facilities, ecosystem grants, and loans to market makers, with a portion of trading revenue and committed capital directed towards a recovery pool to cover roughly $295 million in user losses over time.
The funding comes after the exploit, which saw the attacker pose as a quantitative trading firm for six months before carrying out the attack, resulting in Drift's governance token, DRIFT, losing approximately 70% of its value. The incident also sparked criticism towards Circle for its handling of the situation, with some arguing that the company could have acted faster to blacklist wallets and freeze funds. However, Circle's approach is to only freeze USDC wallets when directed by law enforcement or courts, reflecting its strategy to align closely with regulators and institutions.
In contrast, USDT has been more proactive in 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 seen as a significant move in the stablecoin market. The competition between USDC and USDT is intensifying, with Circle's USDC gaining share due to regulatory alignment and growing institutional use, while Tether's USDT still leads in terms of market supply.
The new funding package will also see Tether provide fee reductions and user incentives tied to Drift's transition to USDT, as well as extend liquidity support to designated market makers to bolster trading depth at relaunch.