Covenants are a category of proposed changes to Bitcoin’s consensus rules that would allow a script to prevent an authorized spender from spending to certain other scripts.

“In the context of Bitcoin, the most useful definition of covenant is that it’s when the scriptPubKey of a UTXO restricts the scriptPubKey in the output(s) of a tx spending that UTXO.” —Anthony Towns (source)

For example, a covenant may normally only allow spending to a whitelisted set of scripts, such as returning bitcoins to the user’s own balance or spending to a staging address that only allows spending to any arbitrary address after a period of time.

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