# Covenant Incentives (Talents)

Covenant rewards participation in the protocol through an incentives program based on **Talents**.

**Talents** are points that track your contribution to Covenant. They are earned by:

* Providing capital to Covenant markets
* Referring other users to the protocol

Talents are tracked off-chain and displayed on a **leaderboard**, allowing users to compare their participation across the ecosystem.

The incentives program runs in **seasons**, with a fixed maximum number of Talents distributed each season.

***

## Season 2

Season 2 runs for 11 **weeks: March 16th to May 30th**.

During this period, Covenant will distribute up to **11,000,000 Talents (maximum)**

Distribution rules:

* A maximum of **4,000 Talents per $100 deposited** in Covenant
* Talents are distributed **proportionally** to the time-weighted TVL deposited or referred

Talents are split between:

* **95% → Users**
* **5% → Referrers**

***

## User Talents

Users earn Talents are distributed proportionally to the **long-term exposure** to Covenant markets. Rather than rewarding short-term deposits, the system favors **consistent participation over time**.

User rewards are calculated using the following metric:

$$
User Score =D\_1^{1/2}.D\_{20}^{1/2}.T.R
$$

Where

*  $$D\_1$$ is the user's daily deposit TVL across participating markets
*  $$D\_{20}$$ is the user's average 20-day deposit TVL across participating markets
* $$T$$ is a +10% additional factor if the user follows Covenant on Twitter
* $$R$$ is a +10% additional factor if someone referred the user

Talents are distributed daily in proportion to each user's score.

### Why this metric?

This design encourages healthy liquidity and discourages opportunistic farming.

It does so by:

* **Rewarding consistent TVL** maintained over longer periods
* **Penalizing volatility**, such as rapidly depositing and withdrawing capital

In practice, this means users who maintain stable exposure over time earn more Talents than users who briefly deposit large amounts.

***

## Referrer Talents

Referrers earn Talents based on factors including the **TVL contributed by the users they referred**.

This uses the same long-term exposure logic as the user calculation, but based on the aggregate deposit of all individuals they referred.

$$
Referrer Score =R\_1^{1/2}.R\_{20}^{1/4}.T
$$

Where

*  $$R\_1$$ is the referred daily deposits TVL across participating markets
* $$R\_{20}$$ is the referred average 20-day deposit TVL across participating markets
* $$T$$ is a +10% additional factor if the referrer follows Covenant on Twitter

Note that for referrals, the ¼ power is used for the 20 day average, leading to a sublinear increase of the referrer score vs TVL.<br>

***

## Worked Example

Consider the following simplified example.

#### User Activity

Alice deposits **$10,000** into Covenant and keeps it there consistently.

After 20 days:

* $$D\_1 = 10,000$$
* $$D\_{20} = 10,000$$

Her score becomes:

&#x20;$$\begin{align\*}  User Score &= 10,000^{1/2} \* 10,000^{1/2}  \          &= 100 \* 100\ &= 10,000 \end{align\*}$$

Now consider Bob.

Bob deposits **$10,000 most days,** but last week took it out of Covenant markets for a few days

His averages become:

* $$D\_1 = 10,000$$
* $$D\_{20} = 8,100$$

His score becomes: 9,000