This is achieved through an inventive use of covenant emulators alongside signing servers, setting it apart from prior methods aimed at simulating covenants. A pivotal aspect of this strategy is the imposition of a requirement for oracle signers to place bonds with BitVM auditors. These bonds are subjected to a risk of forfeiture under a specific BITVM style fraud proof regime, where any act of authorizing transactions in contravention of the established covenant rules could result in the loss of these funds. This serves as a deterrent against violations of covenant conditions by introducing a financial repercussion for non-compliance.

This approach is detailed further in a paper that elucidates the framework necessary for enforcing Bitcoin covenants without necessitating direct modifications to the blockchain's underlying protocol. The paper presents a comprehensive exploration of the mechanics behind this innovative solution, offering valuable insights into its potential application within the Bitcoin ecosystem. Interested parties can delve into the specifics of this proposal by accessing the document provided online, which promises an extensive analysis of the operational aspects of the proposed system. The discussed mechanism highlights a significant advancement in the realm of Bitcoin technology, proposing a viable solution for the implementation of covenants that preserves the integrity of the existing protocol. The full details of this approach, including theoretical underpinnings and practical implications, are available in the paper accessible via this link, inviting further scrutiny and discussion among Bitcoin developers and enthusiasts alike.