Glossary

A list of terms commonly used in Covenant's documentation and their corresponding descriptions.

Term	Description
Base Asset	The underlying collateral (e.g., ETH, WBTC, stETH, sUSDe) deposited into a Covenant Market
Covenant Market	A self-contained market within the Covenant Protocol that transforms a deposited Base Asset (e.g., ETH, WBTC, stETH, sUSDe) into two fungible claims: Margin Coins and Leverage Coins. Each Covenant Market is defined by: a specific Base Asset; a price oracle (denominating that asset in a quote unit); and a debt duration parameter (used in the Perpetual Debt mechanism). a min / max market price (concentrating liquidity in the Latent Swap AMM) All Yield Coins and Leverage Coins in a given Covenant Market are fully collateralized and redeemable back to the Base Asset at any time. Prices and interest rates in each Covenant Market are continuously set by the Latent Swap AMM, which couples Yield Coin price, Yield Coin implied interest rate, and market LTV so that funding and leverage remain self-balancing rather than fixed by governance or managed via forced liquidations.
Covenant Protocol	The set of smart contracts and mechanisms that power the Covenant credit marketplace. The Covenant Protocol is responsible for: Collateral management: Accepting deposits of Base Assets into Covenant Markets and minting fully collateralized Margin Coins and Leverage Coins. Interest rate setting (via Covenant’s Perpetual Debt mechanism): Implementing the Perpetual Debt mechanism, where the price of Margin Coins continuously determines their implied interest rate and value accrual. Market clearing (Latent Swap AMM): Operating a convex swap curve that links Margin Coin price, market LTV, and leverage, so that funding and risk are self-balancing without governance-set rates or per-position liquidations. Redemptions: Ensuring that Margin Coins and Leverage Coins are always redeemable back to the underlying Base Asset at market rates. Optional pooling ($sUSDz): Supporting pooled lending products (e.g., the Covenant sUSDz Margin Fund, $sUSDz) that diversify exposure across multiple Covenant Markets. In short, the Covenant Protocol is the on-chain infrastructure that transforms any Base Asset into a continuously clearing lending market, matching leverage users (borrowers) with margin providers (lenders).
Latent Swap	Covenant’s automated market maker (AMM) that governs swaps between Margin Coins, Leverage Coins, and the underlying Base Asset within a Covenant Market.
Leverage Coin	Leverage Coins provide leveraged exposure to the Base Asset’s price and (where applicable) native yield. In exchange for this leverage, Leverage Coin holders implicitly pay funding to Margin Coin holders at the APY implied by the Margin Coin price. Issuance/pricing is regulated by the Latent Swap invariant so leverage becomes progressively more expensive as LTV rises. Leverage Coins are fungible ERC20 claims redeemable to the Base Asset on a per-market basis (not pooled across assets).
Yield Coin	A fully‑collateralized debt minted by a Covenant Market when a Base Asset is deposited. A Yield Coin’s interest accrues continuously and is implied by its market price via Covenant’s Perpetual Debt Mechanism. Yield Coins are fungible ERC20 redeemable to the Base Asset on a per-market basis (not pooled across collateral assets).
sUSDz Yield Fund	The Covenant sUSDz Yield Fund is an optional pooled lending product that diversifies lender exposure across multiple Covenant Markets with USD as their quote token. Lenders deposit supported assets into the fund and receive $sUSDz, a fungible ERC20 receipt token representing their share of the fund’s NAV. The fund allocates capital by holding a portfolio of Yield Coins across different markets, so $sUSDz holders are effectively long a diversified set of yield exposures. This structure provides a simple way for lenders to participate in the Covenant marketplace without needing to select and manage exposure to individual Base Asset markets.
sUSDz Margin Fund Receipt Token ($sUSDz)	Participating lenders deposit supported assets to the sUSDz Margin Fund and receive $sUSDz, a receipt token that tracks their share of the sUSDz Margin Fund’s NAV. $sUSDz is a fungible ERC20 claim redeemable against the Base Assets in the sUSDz Margin Fund.
Perpetual Debt	A financial primitive in the Covenant Protocol that makes Yield Coins work. Yield Coins are designed as a continually refinancing zero-coupon bond (i.e. Perpetual Debt): instead of expiring at a fixed maturity, the Yield Coin’s notional balance automatically grows or shrinks over time at a rate implied by its market price.