The primary objective is to utilize a covenant-based solution to ensure accurate and theft-proof payouts without requiring custody, aligning with a "can't-be-evil" philosophy. This comes as an alternative to the proposed use of a FROST federation which, despite its innovative approach to signing and verifying transactions independently by each federation node using the Braidpool Directed Acyclic Graph (DAG), presents significant risks including vulnerability to 51% or 67% attacks and the potential for political complications in federation membership decisions.

The construction of transactions follows a specific order: the UHPO (User Hosted Payouts Organization) transaction is created and signed first, ensuring that all payouts can be independently verified by the federation nodes. Following this, the RCA (Reward Consolidation Address) transaction is signed, dependent on the successful signing of the UHPO transaction by a Byzantine fault-tolerant quorum of federation nodes. This signing process requires a supermajority, established at 67% of the nodes, to mitigate against unauthorized modifications.

However, the reliance on a FROST federation begs the consideration of covenant-based alternatives that eliminate custodial risks and enforce strict transaction paths to guarantee correct payouts. These covenants would dictate that the RCA transaction could only lead to a new RCA transaction through aggregation with another coinbase or be spent in a UHPO transaction after a timelock, with no other spending avenues permissible. Additionally, it introduces safeguards such as allowing blocks with incorrect payouts to be claimed as solo-mined blocks after a potential timelock, aiming to preserve miner rights in scenarios of pool failure or misconstructed RCA/UHPO transactions.

Furthermore, these proposals emphasize the dynamic nature of payout adjustments with each new block found by the pool, necessitating a design where the next UHPO cannot prematurely commit to payouts without knowing the specifics of incoming blocks. In the event of detected theft attempts or significant attacks on the federation mechanism, mechanisms are suggested to allow the immediate broadcast of a "last-known-good" UHPO transaction, bypassing standard timelocks and effectively nullifying compromised RCA Eltoo mechanisms for future transactions.

The guidelines also suggest considering the 100 block coinbase maturity rule in crafting these covenant proposals, offering a few preliminary suggestions such as replicating outputs from the previous UHPO with adjusted amounts or directly committing the RCA to fees within a pool's block to circumvent the RCA mechanism. These initial ideas aim to foster further innovation in devising covenant strategies that ensure secure and accurate payouts while respecting the decentralized ethos of Bitcoin.