Covenant Protocol
Covenant is a Uniswap v4 hook for exit-aware liquidity. It changes what a sell does.
On a normal pool, every sell is pure exit: tokens leave, price drops, and nothing remains. Covenant reroutes part of that exit into a short-lived, on-chain obligation — a covenant — that buyers can absorb at a discount, and that becomes permanent protocol liquidity if they don't.
Every exit leaves a covenant. The market decides whether to forgive it.
The core loop
The whole protocol is one loop, enforced during the swap by the hook:
- Sell → covenant. When someone sells, the hook retains 20% of the net proceeds as a covenant: temporary exit debt, priced at the sell's realized price.
- Buy → absorption. Incoming buys are matched against open covenants first, at a 5–20% discount, before touching the pool.
- Expiry → locked LP. Any covenant still open 7 days after creation is settled by the hook into a permanent, protocol-owned liquidity position.
A flat 3% tax (in ETH) is levied on every buy and sell and sent to an immutable creator address.
Why it matters
Covenant makes sell pressure visible, absorbable, and productive instead of a silent drain:
- Sellers get a normal exit, minus a retained slice that is no longer their claim.
- Buyers get a real discount for stepping in when others leave.
- The pool gets deeper every time a covenant expires unabsorbed.
Covenant is non-custodial and immutable: no admin keys, no upgrades, no protocol-side discretion over user funds. The rules are compile-time constants of the hook.
Where to go next
- New here? Start with What Covenant is and the sell-pressure problem.
- Want the mechanism in detail? Read How it works.
- Building on it? Jump to the architecture and the v4 hook.
- Weighing the risks? See the security review and known risks.
Covenant is an unaudited, testnet-stage MVP. Contracts are immutable, but they have not had an external audit. Do not treat anything here as financial advice or a guarantee. See Known risks.