Drift Protocol unveiled a comprehensive recovery plan on Tuesday, for its customers following a devastating attack that had cost the company $295 million.
The efforts to recover are happening as the platform prepares for a relaunch with improved features and enhanced security systems.
The hack, attributed to a DPRK-linked attacker by Mandiant, led to the halting of trading and borrowing via the protocol. In a month’s time, the group asserts that recovery is underway, but restoring all of the users’ finances would need funding from several sources.
Drift tracks 130K ETH
Drift protocol recently noted that the bigger amount of the stolen cryptocurrency remains traceable in the blockchain, making it difficult for the attacker to covertly launder the stolen funds. Approximately 130,000 ETH (valued at around $293 million) has been found within a few wallets and is now under heavy surveillance.
Some of the assets involved in the movement of assets via Wormhole-connected cross-chain bridges are now effectively locked, and their movement is blocked until late July. In addition, stablecoins moved via Circle infrastructure are also currently frozen.
Drift is collaborating with relevant authorities to get legal permission to return these funds.
Drift’s recovery token
Drift’s recovery plan revolves around a “recovery token” that will be given to every affected user, essentially converting their losses into something they can track and eventually reclaim.
Each token corresponds to one dollar of verified loss, calculated from a snapshot of user balances taken at the moment the platform was paused. These tokens are separate from Drift’s governance token and work like IOUs tied to a shared recovery pool.
Users can redeem them as funds are rebuilt over time, but opting to withdraw early could reduce how much they ultimately receive if additional funds are recovered later.
The recovery pool will be kickstarted with roughly $3.8 million in remaining protocol assets, which Drift plans to convert into stablecoins to maintain a steady value. After that, the fund will gradually be filled by the platform’s earnings, additional investments from outside sources, and, most importantly, up to $127.5 million from Tether, which depends on their performance.
Furthermore, other participants in the venture have committed up to $20 million to assist in the process.
Drift plans to continue replenishing this fund until it reaches the sum needed to cover the losses, which amounts to near $295.4 million.
Once that target is reached, recovery tokens can be redeemed at their full value.
Meanwhile, the protocol’s insurance fund, previously estimated at around $20 million, was not affected by the exploit. Its eventual use, whether distributed directly to depositors or added into the recovery pool, will be decided through a DAO vote.
Several important aspects of the plan, including how assets are ultimately handled and the exact mechanics of the tokens, will still need to go through governance proposals before everything is finalized and implemented.
Drift says pooled liquidity limits immediate user withdrawals
Drift said it isn’t able to simply return the remaining assets directly to users because of how its pooled liquidity system is designed. As both borrowing and lending require liquidity, the sudden withdrawal of all available liquidity would result in an imbalance in the system and would affect the internal accounting process.
It will be better to create the required liquidity by converting the assets into stablecoins and distributing the recovered amounts to meet the obligations efficiently and without causing additional pressure on the system.
At the same time, the recovery process is ongoing and receiving assistance from various cybersecurity companies and organizations in the industry. A public bounty scheme that rewards individuals for returning funds through their white-hat hacking skills has been started. This includes 10 percent of the recovered funds, in association with companies such as Bybit.
The targeted date for relaunching the platform is Q2 2026. At that point in time, Drift aims to have better security measures and improved product line, including smart contracts and utilization of USDT as the collateral.
