In the aftermath of a devastating North Korean-led exploit, Drift Protocol has announced plans to relaunch with Tether's USDT as its primary settlement layer, thanks to a proposed $147.5 million funding package from Tether and its partners. The deal comprises $127.5 million from Tether and $20 million from other partners, aimed at facilitating user recovery and rebooting 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 allocated to a recovery pool to cover approximately $295 million in user losses over time. This development comes on the heels of a North Korea-linked group infiltrating Drift Protocol, posing as a quantitative trading firm for about six months before executing an exploit that exceeded $270 million on April 1. Since the exploit, Drift's governance token, DRIFT, has lost around 70% of its value.

The funding marks a significant shift, as Circle faced criticism for its response to the exploit, with some arguing that the company could have acted faster to halt the transfer of funds. In contrast, Tether has demonstrated a more agile approach to 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 poised to have a significant impact on the stablecoin market. The competition between USDT and USDC continues to intensify, with Circle's USDC steadily gaining ground on Tether's long-standing dominance. While USDT still maintains a significant lead, with approximately $185.5 billion in supply compared to USDC's $78.6 billion, Circle's transaction volume has outpaced Tether's in recent months. The new funding package will also enable Tether to fund fee reductions and user incentives tied to Drift's transition to USDT, while extending liquidity support to designated market makers to bolster trading depth at relaunch.

This strategic move positions USDT at the core of Drift's trading infrastructure, providing a pathway to restore user funds and resume operations.