In the aftermath of a significant exploit linked to a North Korean group, Drift Protocol has announced plans to relaunch with Tether's USDT as its new settlement layer, following the securing of a substantial funding package worth up to $147.5 million from Tether and its partners. This package, which includes up to $127.5 million from Tether and $20 million from other partners, is designed to support the recovery of user funds and the rebooting of the platform as a USDT-based perpetual futures exchange on Solana, marking a shift away from Circle's USDC.
The funding is structured as a combination of a revenue-linked credit facility, ecosystem grants, and loans to market makers, with a portion of trading revenue and committed capital being allocated to a recovery pool aimed at covering approximately $295 million in user losses over time. This development comes on the heels of a North Korea-linked group's infiltration of Drift Protocol, where they posed as a quantitative trading firm for about six months before executing an exploit that exceeded $270 million on April 1. The aftermath of the exploit has seen Drift's governance token, DRIFT, lose about 70% of its value. The incident also drew criticism towards Circle for its handling of the exploit, particularly its decision not to halt the transfer of funds.
Circle's approach, as explained by its CEO Jeremy Allaire, is to freeze USDC wallets only when directed by law enforcement or courts, citing legal risks. In contrast, USDT has demonstrated a more agile approach to freezing funds linked to hacks or illicit activities. As the largest decentralized perpetual futures exchange on Solana, with over 175,000 users and a cumulative trading volume of roughly $150 billion, Drift's transition to USDT is significant.
Founded in 2021, 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, fintechs, and traditional financial institutions vying for control of on-ramps, liquidity, and settlement layers. While USDT still maintains a significant lead with approximately $185.5 billion in supply compared to USDC's $78.6 billion, Circle's USDC has been gaining ground due to its regulatory alignment and growing institutional use.
The funding package from Tether also includes plans to support fee reductions and user incentives tied to Drift's transition to USDT, as well as extending liquidity support to designated market makers to enhance trading depth at the time of relaunch. This move positions USDT at the heart of Drift's trading infrastructure, providing a pathway for the restoration of user funds and the resumption of operations.