Following a significant security breach attributed to a North Korean-linked group, Drift Protocol has announced plans to relaunch with Tether’s USDT as its settlement currency. The initiative is backed by a proposed funding package of up to $147.5 million from Tether and additional partners, disclosed on Thursday.
The financial support includes up to $127.5 million from Tether and $20 million from other collaborators. This funding aims to aid user recovery after the April 1 exploit and facilitate Drift’s transition into a USDT-based perpetual futures exchange on Solana, moving away from its previous use of Circle’s stablecoin, USDC.
The rescue package encompasses a revenue-linked credit facility along with ecosystem grants and loans for market makers. A portion of trading revenue, together with committed capital, will be directed to a recovery pool intended to address approximately $295 million in user losses over time.
The exploit on April 1 resulted in losses exceeding $270 million after attackers infiltrated Drift Protocol by masquerading as a quantitative trading firm for several months. The governance token of Drift, DRIFT, has since decreased by about 70%.
Circle faced criticism from the crypto community for its perceived delay in halting money transfers post-exploit. Approximately $232 million in USDC was moved by the attacker from Solana to Ethereum using Circle’s cross-chain protocol. Critics like blockchain investigator ZachXBT argued that Circle could have acted faster to blacklist wallets and freeze funds, potentially slowing down or stopping asset movement.
However, Circle’s CEO Jeremy Allaire clarified that his company freezes USDC wallets only upon directives from law enforcement or courts, not in real-time during hacks. This approach aligns with Circle’s strategy to work closely with regulators and institutions.
In contrast, Tether is noted for its ability to quickly freeze funds related to hacks or illicit activities. Drift, as the largest decentralized perpetual futures exchange on Solana, has over 175,000 users and about $150 billion in cumulative trading volume since its founding in 2021, offering services like perpetuals, spot trading, lending, borrowing, and cross-margin trading.
The competition among stablecoins is intensifying as exchanges, fintechs, and traditional financial institutions vie to control the infrastructure of digital asset markets. Circle’s USDC has been encroaching on Tether’s dominance in the market, gaining traction through regulatory alignment and institutional use.
Despite Tether’s leading position with approximately $185.5 billion in supply compared to USDC’s $78.6 billion, according to CoinDesk data, Circle’s transaction volume recently surpassed Tether’s as its market share expanded.
With this new funding arrangement, Tether also aims to subsidize fee reductions and user incentives linked to Drift’s shift to USDT while extending liquidity support to designated market makers to enhance trading depth upon relaunch. Drift anticipates that positioning USDT at the heart of its trading infrastructure will facilitate restoring user funds and resuming operations.