The sell pressure problem
On an ordinary token, selling is frictionless and total. Someone with a large position can leave in one transaction: the tokens hit the pool, the price collapses, and the seller is gone. Everyone still holding absorbs the damage, and nothing is left behind.
The usual answer is a sell tax: take 5%, sometimes 10%, and send it somewhere. It reduces the size of the exit a little, but it does not change its nature. The seller is still gone, and the tax is a pure cost with nothing on the other side.
What Covenant does differently
Covenant keeps a share of the exit inside the system, attached to the person who left. Those tokens do not go back to them, and they do not hit the market either: they become a bond that pays a daily reward.
The effect on the seller is not "you lost 10%". It is "10% of your exit stays at work".
Be clear-eyed about the cost
Exiting Covenant is expensive, and it should be stated plainly rather than sold as a feature:
| Cost | |
|---|---|
| Entering (buying) | 3% |
| Exiting without a commit bond | 12.7% — 3% tax plus 9.7% into a bond |
| Exiting inside your retention-free allowance | 3% — the tax only; the retention is waived |
For a seller with no commit bond, leaving costs more than seven times what entering costs. You are paid, in ETH, for 87.3% of what you sell. The remaining 9.7% is not lost — it becomes your bond — but you will never hold those tokens again.
Every bond opens a lifetime allowance of 5x the principal it opened with, and while a sale fits inside what remains of it, you keep 100% of the net, minus only the 3% tax — no retention, no new bond. It works on any route, as long as the tokens sold come out of your own wallet. Committing is the bigger lever, because you choose the size. The allowance is cumulative: every exempt sale eats into it, opening another bond refills it, compounding does not, and once it is spent the full retention comes back.
The trade-off, stated once
The friction is the product. Without it there is no bond, no reward pool, and nothing that distinguishes Covenant from any other token with a tax. Whether that trade is worth it is your call to make, with the numbers above in front of you.