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 20%". It is "20% 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 | 22.4% — 3% tax plus 19.4% 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 77.6% of what you sell. The remaining 19.4% is not lost — it becomes your bond — but you will never hold those tokens again.
Committing changes the deal: it opens a lifetime allowance of 5x the committed principal, 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. The allowance is cumulative: every exempt sale eats into it, committing more or compounding refills it, 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.