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In this week's edition, Lucas Tcheyan considers the ramifications of Tether bailing out the Drift protocol; Will Owens unpacks X's new Smart Cashtag feature; and Lucas explains the struggles of the Scroll network.
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Market Update
The total crypto market cap stands at $2.64tn, up 3.71% from last week (when it stood at $2.55tn). Bitcoin's network value is 4.51% of gold's market cap. Over the last seven days, BTC is up 4.59%, ETH is up 6.47%, and SOL is up 5.25%. Bitcoin dominance is 57.43%, up 24 basis points from last week.
Tether Bails Out Drift With $147m in Bid for Solana Market Share
Two weeks after suffering the largest DeFi exploit of 2026, Solana-based perpetuals exchange Drift Protocol released a detailed recovery plan Thursday that includes a support package from stablecoin giant Tether and others totaling up to $147.5 million.
As previously covered by Galaxy Research, on April 1 attackers drained approximately $295.7 million from Drift's vaults in roughly 12 minutes through a sophisticated social engineering operation attributed to North Korean-linked threat actors. Drift's TVL collapsed from around $550 million to under $250 million, and the DRIFT token dropped more than 40%.
Under the recovery framework, Tether will contribute up to $127.5 million and additional partners up to $20 million. The rescue package includes a $100 million revenue-linked credit facility, an ecosystem grant, and loans to market makers. The credit facility, which accounts for two-thirds of the package, is a loan whose ultimate proceeds will depend on the amount of trading fees generated after relaunch. The market maker loans will support platform liquidity but will not flow into the user recovery pool directly. The ecosystem grant, the only component without repayment strings, makes up the smallest portion.
Drift will also issue a transferable recovery token (separate from the DRIFT governance token) to impacted users, with each token representing a claim on the recovery pool. In exchange for the rescue funds, Drift will migrate from Circle’s USDC to Tether’s USDT as its settlement layer at relaunch, with Tether extending market-making support to ensure deep liquidity from Day One.
The protocol relaunch is contingent on independent audits from OtterSec and Asymmetric Research; a new community-governed multisig; timelocks on all critical admin actions; and a ban on durable nonces for signers. Lack of such safeguards was part of what made the devastating exploit possible.
Our Take
This bailout by Tether looks like a strategic land grab on Solana. USDC commands 50.2% of Solana's $16.3 billion stablecoin supply while USDT sits at just 18.7%. If Drift relaunches as USDT-native and recaptures even half its prior volume, that's roughly $46 billion in new USDT-denominated perp flow on a chain where Tether’s token has been a distant second. For the broader Solana perps ecosystem, which has struggled to keep pace with Hyperliquid, a Tether-backed Drift relaunch with deep liquidity could be a meaningful catalyst.
The rescue deal has to be considered in the context of the Circle controversy that preceded it. When the exploit unfolded, roughly $230 million in stolen USDC was bridged from Solana to Ethereum over several hours during the U.S. business day. Circle, based in New York, did not freeze the funds. CEO Jeremy Allaire later defended the decision as prudent, saying Circle only acts when compelled by law enforcement or courts. Critics, including onchain sleuth ZachXBT, claimed Circle's inaction across multiple incidents has allowed over $420 million in illicit funds to escape since 2022. Others countered that stablecoin issuers using their freeze powers on a discretionary basis would undermine DeFi itself.
Tether, for its part, responded more proactively to the attack. Its USDT0 protocol halted its cross-chain communication network on Solana within 90 minutes of the hack, and the company's official partnership announcement pointedly noted its collaboration with over 310 law enforcement agencies across 64 countries and $800 million in recovered funds. The language is clearly aimed at shaming archrival Circle without naming it.
On the recovery itself, Drift's proposed token model has a direct precedent in Bitfinex (a company with strong historical ties to Tether), which issued BFX tokens at one per dollar lost after its $72 million hack in 2016. But Drift faces a steeper climb. Bitfinex was already dominant with a captive user base when Ilya Lichtenstein breached its defenses, while before its hack Drift's monthly revenue had collapsed 81% from its October 2025 highs. At Drift's pre-exploit run rate of roughly $18 million per year, repaying just the $100 million credit facility would take more than five years even if 100% of revenue went to repayment. Drift’s announcement says "a substantial portion" of its future revenue (i.e. not all of it) will help fund recoveries.
Tether's press release makes the structure explicit. Capital support will be "introduced progressively and aligned with performance," with recovery linked to "ongoing trading activity on the Drift platform." In other words, the support package is headline numbers for now, and full recovery will depend on Drift becoming operational again.
Whether Drift can rebuild the volume to make the math work is the open question. It faces steep competition not only externally from Hyperliquid, but from a crop of new Solana-focused perps exchanges including Phoenix and Bulk. But for Tether, this move is likely less about Drift specifically and more about establishing a foothold on a chain where it can't afford to remain a distant second. – Lucas Tcheyan
X Turns the Timeline Into a Trading Terminal
X has rolled out support for “Smart Cashtags,” an upgraded version of the previous “Cashtags” supported on the platform formerly known as Twitter. X Head of Product Nikita Bier (@nikitabier) posted the launch details on April 14. Previously, individuals could click stock or crypto tickers (for example $BTC or $MON) to find related tweets, but functionality was limited. Cashtags were essentially static links with no way to distinguish between assets sharing the same ticker.
X has tested Smart Cashtags for a few months. Galaxy Research previously discussed the idea in a report and on the Galaxy Grid show. The goal is to let users to specify the exact asset (or contract address) when posting, then tap it for real-time price data and all related mentions on the timeline. The contract address support is particularly useful for onchain tokens. You can paste a full Solana contract address and X will resolve it to the correct asset. Tapping a cashtag now opens a dedicated view with a live price chart and all related posts without leaving the app.
The full public launch happened Tuesday (initially for iPhone users in the U.S. and Canada), with an update the next day making it global on iOS. Android and web are coming next. Canadian users are also seeing a “trade” button on cashtags via an integration with Wealthsimple, enabling one-tap buying and selling of stocks and crypto directly from the timeline. The U.S. is not yet included in the trading pilot.
Our Take
This is the first concrete step in X’s push to become a full finance/crypto hub as part of Elon Musk’s “everything app” vision and should not be surprising to anyone who has been paying attention. What’s worth noting is the pace of work. X Money rolled out fiat rails in 40+ states this month and the platform ran a massive crypto bot purge starting April 9, clearing out scam accounts.
To be sure, there have been many attempts over the years to facilitate in-app bitcoin and payments functionality on what was once called Twitter (ChangeTip was a notable early example). But the world has changed in the last 10 years. With more and more individuals doing things onchain, interested in digital assets, and trading socially (we just wrote about social trading), X may be the best positioned company to win. While there are some formidable up-and-coming social trading apps like FOMO and legend.trade, 20-year-old X already has a huge user base.
Imagine a future where you can follow your friends by username and trade prediction markets, perps, onchain tokens, and equities, all on the timeline. This is not unrealistic. Many people want to start trading but they’re too scared or don’t know how. Social trading is a natural bridge to get people to learn the ropes and get better at it. They can follow the best traders on the platform, study their trades, and improve their strategies. It makes sense that X should be the place for financial discussions, because, in Bier's words, “billions of dollars are allocated every day based on what people read on the timeline.”
X could also now become a serious challenger to PayPal’s Venmo. With fiat rails already live in most U.S. states, it’s reasonable to imagine that we’ll be able to send money via X direct messages (DMs). The most obvious way to do that would be stablecoins on blockchain rails, which settle faster than traditional fiat. As the payments space becomes more and more competitive, network effects are important and X remains a significant hub of activity.
The product team itself is loaded with cracked crypto UX people. Benji Taylor leads design at X and previously led design at Base (Coinbase’s layer-2 blockchain) and served as chief product officer of Aave Labs. Bier himself is an active advisor to the Solana Foundation. Solana is perhaps the blockchain that will benefit the most from X crypto integrations given its high throughput and community of avid traders.
With memecoin volumes down since the $TRUMP era, it makes sense for X to lean into all types of trading. Watch this space; X just might become the everything app. – Will Owens
Scroll’s Fee Controversy Signals Bigger Shift in L2 Landscape
Ethereum layer-2 network Scroll is embroiled in controversy following revelations that the team raised its gas oracle fee multipliers by a compounding 1,280x over six days as its largest protocol, EtherFi, migrated off the network. Users were charged upwards of $50,000 more in aggregate than they usually would have been in the process, with the bulk of the excess hitting EtherFi bots mid-migration.
The unusually large charges stemmed from six manual increases to two fee multipliers on Scroll's gas price oracle between March 31 and April 5. Each update raised the previous value by 2x to 10x, executed through the team's multisig wallet. The roughly 139,000 affected transactions normally would have cost a combined $280. EtherFi Cash bots, still running during the protocol's ongoing migration to Optimism, absorbed about $35,000 of the excess, or 66% of the total. On April 9, following the migration, Scroll slashed the multipliers by 160x.
EtherFi, Scroll's dominant app and top fee generator, announced in February it would move its Cash accounts and card program to Optimism, taking with them 70,000 active cards, 300,000 accounts, and nearly $160 million in TVL. The fee spike began the same day EtherFi started migrating, with daily EtherFi transaction fees jumping from roughly $250 to $16,000. EtherFi founder Mike Silagadze commented on April 12. "I've been asked a ton about this. Unfortunately, I can't say much, but if you knew the full story your head would explode."
Scroll has not publicly addressed the fee findings, but on April 14 the team proposed dissolving its Security Council, cutting four DAO contributor roles, and transferring admin control to an internal team multisig.
Our Take
The centralization risks of L2 sequencers have long been discussed in the abstract. A single operator could censor transactions, could extract MEV, could manipulate fees. Recent developments on Scroll just made the threat concrete.
A team multisig unilaterally raised fee multipliers by 1,280x with no governance check, no public notice, and no explanation, and the timing aligned precisely with its largest protocol's departure. Whether the intent was to institute a retaliatory exit tax or not, the outcome was the same. EtherFi's founder hinting that "the full story would make your head explode" only deepens the questions Scroll has refused to answer.
L2s have largely been a disappointment for Ethereum. They diverted infrastructure developers, application builders, and users away from the L1 at a time when Ethereum may have needed them the most. The L1 has maintained its position as the de facto asset issuance and settlement layer, still dominant on metrics like assets borrowed, stablecoin market cap, and RWAs. But in verticals where speed and cost mattered most, competitors like Solana and Hyperliquid have eaten into market share since 2023. The L2 roadmap was supposed to keep that activity in the Ethereum ecosystem. Instead, Ethereum lost out on those revenue generators, and the L2s that were supposed to capture them largely failed at that task.
Even L2s that have succeeded commercially have come at a cost to Ethereum's credibility as decentralized infrastructure. Research outfit L2BEAT's Stages framework shows that most rollups remain at Stage 0, meaning they are "effectively run by the operators." Very few have reached Stage 2 (fully controlled by code). And arguably the most commercially successful L2, Base, is controlled entirely by Coinbase through a single centralized sequencer. It has generated an estimated $870 million in annual revenue, almost none of which flows back to Ethereum or ETH holders.
The good news is that Ethereum may finally be righting the ship. Incidents like Scroll's are more likely the last gasps of a dying vertical than a preview of the end state. In February, Ethereum creator Vitalik Buterin acknowledged publicly that the original L2 scaling roadmap "no longer makes sense," citing stalled decentralization and Ethereum L1's own scaling gains. The Ethereum Foundation followed in March with a Strawmap that refocuses development efforts on scaling the L1 directly.
For smaller L2s like Scroll that were built on the premise that Ethereum needed them for scaling, the competitive moat is evaporating. The L2 landscape is consolidating fast around a handful of winners with real ecosystems and loyal users. For the long tail of rollups running on subsidies and a single anchor tenant, Scroll is less a cautionary tale than a preview. – Lucas Tcheyan
Other News
☔🚢SEC gives DeFi front ends a 5-year safe harbor
👔🪆Goldman Sachs enters bitcoin ETF race with an ETF of ETFs
🇫🇷🎭SocGen makes its USD stablecoin available on MetaMask
🇩🇪🦑Deutsche Borse buys $200m stake in Kraken
🦅🔓Trump family’s World Liberty moves to end indefinite token lock
Chart of the Week: Bitcoin's Empty Mempool
Bitcoin’s empty mempool (the waiting room for pending transactions) is one of the clearest signs that rising adoption of the original cryptocurrency is not necessarily translating into rising onchain usage.
A growing share of demand now sits inside public treasury companies and spot BTC ETFs, both of which accumulate and warehouse bitcoin rather than transact with it regularly on the base layer. In practical terms, more capital is flowing into bitcoin as a balance sheet asset and portfolio allocation, but far less of that activity is showing up as sustained competition for blockspace. The chart below depicts the historical size of an average mempool (every node has its own mempool) by transaction count.
Note that this depiction shows a mempool that is not accepting transactions that include irregularly low transaction fees (<1 sat/vbyte). (Due to the lack of fee pressure, some nodes have begun accepting nearly zero-fee transactions, of which there are many. Those can make it into blocks when there are not many higher-paying transactions.)
That dynamic matters because these vehicles suppress the transactional footprint that would normally accompany a broadening investor base. ETF shares can change hands all day without any bitcoin moving onchain, while treasury companies tend to buy, custody, and sit still. The result is a market where bitcoin can trade near record highs even as the network itself feels quiet. Price strength, in other words, is being driven increasingly by financialization rather than by direct use of Bitcoin’s settlement rail.
With more bitcoin locked inside relatively inactive custody pools and more speculative activity migrating elsewhere, the mempool has thinned out dramatically. That is good news for users seeking cheap transfers, but it is a more sobering signal for anyone focused on the long-term health of Bitcoin’s fee market. – Christopher Rosa
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