Covenant Protocol
Covenant is a Uniswap v4 hook where leaving the market funds a position. It changes what a sell does.
On a normal pool, a sell is pure exit: tokens leave, the price drops, and nothing remains. On Covenant, part of every sell stays behind as a bond — a position, owned by the seller, that pays a daily reward.
You do not have to sell to get one. Any holder can open a bond deliberately, on better terms, without touching their exposure to the market.
sell 1000 CVN
→ 30 CVN (3%) tax, paid to the creator in ETH
→ 194 CVN (19.4%) becomes YOUR bond, earning 10%/day
→ 776 CVN (77.6%) sold normally — you receive the ETH
open a bond instead (no sell)
→ commit 20%..100% of your balance
→ the bond earns 15%/day — the 10% base plus a +5 boost, because committing is a choice
That split is the default, not the whole story. Committing grants a lifetime, retention-free selling allowance of 5x your commit principal: while a sale fits inside what is left of it, the 20% retention is skipped entirely — the 3% tax, nothing else, no new bond. The route does not matter, only that the tokens sold come out of your own wallet. Past the quota, the retention returns. The boost cuts the other way: sell or transfer even one token out and every commit bond you hold loses its +5 points, permanently. Both rules are detailed in Opening a bond.
What a bond does
| Action | Effect |
|---|---|
| Compound (at most once per 6h) | Rewards roll into the principal and the daily rate gains +0.25 point |
| Claim | Rewards are paid out. The rate is not reset. |
The effective rate is capped at 20%/day. Reaching it takes 5 days of diligent compounding for a boosted commit bond, or 10 days for a bond born from a sell.
Which network
Covenant launches on Ethereum mainnet. Nothing else is a target. Rehearsals run on Ethereum Sepolia, and anything deployed there is a testbed with no value — see Addresses & network.
A bond is an NFT
Each position is an ERC-721 token, so ownership is verifiable on-chain like any other
token. You can hold several at once, and merge folds them into a single position.
Rewards come from a finite reserve (20% of the supply) plus the tokens committed by later entrants. No trading fee funds the bonds — the 3% goes entirely to the creator.
That means the total ever distributable is bounded, early bonds are partly paid with the deposits of later ones, and the reserve is finite: nothing refills it before payouts stop. This is a deliberate design choice, stated here rather than buried.
Where to go next
- The sell pressure problem — why this exists
- Core mechanics — the mechanism, step by step
- Known risks — what can go wrong, in plain words