Create transfer-setup.md

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+# Transfer your setup from a covenant signer to a covenant emulator
+
+## Table of Contents 
+
+1. [Purpose of this guide](#1-purpose-of-this-guide)
+2. [Prerequesites](#2-prerequisites)
+3. [Install Covenant Emulator Binary](#3-install-covenant-emulator-binary)
+4. [Setting up the Covenant Emulator Program](#4-setting-up-the-covenant-emulator-program)
+	1. [Initialize directories](#41-initialize-directories)
+	2. [Configure the covenant emulator](#42-configure-the-covenant-emulator)
+5. [Setting up the Covenant Signer](#5-setting-up-the-covenant-signer)
+6. [Importing your keys from the prior setup](#6-importing-your-keys-from-the-prior-setup)
+7. [Verifying Your Setup](#7-verifying-your-setup)
+
+## 1. Purpose of this guide
+
+This guide explains how to transition your setup from solely using the covenant 
+signer to integrating the covenant emulator alongside the covenant signer.
+
+Previously, the [covenant signer](https://github.com/babylonlabs-io/covenant-signer), was limited to signing unbonding signatures.  With this 
+transition we are introducing the [covenant emulator](https://github.com/babylonlabs-io/covenant-emulator), which retrieves delegations from Babylon chain
+ and signs them by communicating with the updated [covenant signer](https://github.com/babylonlabs-io/covenant-emulator/tree/main/covenant-signer). The updated 
+ covenant signer can now generate both unbonding signatures and adaptor signatures, 
+ whereas previously it was limited to creating only unbonding signatures.
+
+In this guide, we will cover exporting the key from the Bitcoin node and importing 
+it into the new integrated keyring in the covenant signer. 
+
+## 2. Prerequisites
+
+To complete the guide you will need to have the following setup:
+
+1. Setup of bitcoin node in order to retrieve keys, seen [here](https://github.com/babylonlabs-io/covenant-signer/blob/main/docs/deployment.md#2-bitcoind-setup).
+2. Access to the private Bitcoin key (covenant emulator key).
+
+## 3. Install covenant emulator binary 
+
+Download [Golang 1.21](https://go.dev/dl) 
+
+Using the go version 1.21. Once installed run: 
+
+```shell
+go version
+```
+
+Subsequently clone the covenant [repository](https://github.com/babylonlabs-io/covenant-emulator).
+
+```shell
+git clone [email protected]:babylonlabs-io/covenant-emulator.git
+cd covenant-emulator
+git checkout <tag>
+```
+
+Run the following command to build the binaries and
+install them to your `$GOPATH/bin` directory:
+
+```shell
+make install
+```
+
+This command will:
+- Build and compile all Go packages
+- Install `covd` binary to `$GOPATH/bin`
+- Make commands globally accessible from your terminal
+
+If your shell cannot find the installed binary, make sure `$GOPATH/bin` is in
+the `$PATH` of your shell. Use the following command to add it to your profile
+depending on your shell.
+
+```shell
+export PATH=$HOME/go/bin:$PATH
+echo 'export PATH=$HOME/go/bin:$PATH' >> ~/.profile
+```
+
+## 4. Setting up the covenant emulator program
+
+### 4.1. Initialize directories
+
+Next, we initialize the node and home directory. It should generate all of the 
+necessary files such as `covd.config`, these files will live in the `<path>` 
+that you set for the `--home`with the below command.
+
+```shell
+covd init --home <path>
+```
+
+After initialization, the home directory will have the following structure:
+
+```shell
+$ ls <path>
+  ├── covd.conf # Covd-specific configuration file.
+  ├── logs      # Covd logs
+```
+
+### 4.2. Configure the covenant emulator
+
+To set up the connection parameters for the Babylon chain and other covenant 
+emulator settings, configure the `covd.conf` file with the following parameters.
+
+```
+# The interval between each query for pending BTC delegations
+QueryInterval = 15s
+
+# The maximum number of delegations that the covd processes each time
+DelegationLimit = 100
+
+# Bitcoin network to run on
+BitcoinNetwork = simnet
+
+# Babylon specific parameters
+
+# Babylon chain ID
+ChainID = bbn-test-5
+
+# Babylon node RPC endpoint
+RPCAddr = https://rpc-euphrates.devnet.babylonlabs.io:443
+
+# Babylon node gRPC endpoint
+GRPCAddr = https://rpc-euphrates.devnet.babylonlabs.io:443
+
+# Name of the key in the keyring to use for signing transactions
+Key = covenant-key
+
+# Type of keyring to use,
+# supported backends - (os|file|kwallet|pass|test|memory)
+# ref https://docs.cosmos.network/v0.46/run-node/keyring.html#available-backends-for-the-keyring
+KeyringBackend = test
+```
+
+## 5. Setting up the covenant signer
+
+Before proceeding, ensure you have completed the [Covenant Signer Setup](https://github.com/babylonlabs-io/covenant-signer/blob/main/docs/deployment.md#4-covenant-signer-setup). 
+This involves deploying the Covenant Signer server, which is responsible for 
+receiving unbonding transactions and returning them signed by the covenant 
+emulator's key.
+
+## 6. Importing your keys from the prior setup
+
+At this stage, you should already have access to the Bitcoin node. If you need a
+refresher on setting up `bitcoind`, refer to the [setup guide](https://github.com/babylonlabs-io/covenant-signer/blob/main/docs/deployment.md#2-bitcoind-setup). 
+Once you have node access, you can proceed with the next steps.
+
+Load wallet with your covenant key.
+
+```shell
+bitcoind bitcoin-cli loadwallet "covenant-wallet"
+```
+
+If we want to then confirm that this was successful, we can then retrieve 
+information about our address to the corresponding key that was returned. 
+
+```shell
+bitcoind bitcoin-cli getaddressinfo bcrt1qazasawj3ard0ffwj04zpxlw2pt9cp7kwmnqyvk
+```
+
+This should generate output information on your address.
+
+```json
+{
+  "address": "bcrt1qazasawj3ard0ffwj04zpxlw2pt9cp7kwmnqyvk",
+  "scriptPubKey": "0014e8bb0eba51e8daf4a5d27d44137dca0acb80face",
+  "ismine": true,
+  "solvable": true,
+  "desc": "wpkh([5e174bde/84h/1h/0h/0/0]023a79b546c79d7f7c5ff20620d914b5cf7250631d12f6e26427ed9d3f98c5ccb1)#ye9usklr",
+  "parent_desc": "wpkh([5e174bde/84h/1h/0h]tpubDDeLN74J6FLfbwXGzwrqQ8ZCG9e4c9uVLP5TjLxLwZVNewFwZ5qB14mu7Fa1g1MStVvUAwXDZHkBzjjNpiRCq9JoA8yxDW9hh7xyqGkhter/0/*)#59fjcx8s",
+  "iswatchonly": false,
+  "isscript": false,
+  "iswitness": true,
+  "witness_version": 0,
+  "witness_program": "e8bb0eba51e8daf4a5d27d44137dca0acb80face",
+  "pubkey": "023a79b546c79d7f7c5ff20620d914b5cf7250631d12f6e26427ed9d3f98c5ccb1",
+  "ischange": false,
+  "timestamp": 1732624709,
+  "hdkeypath": "m/84h/1h/0h/0/0",
+  "hdseedid": "0000000000000000000000000000000000000000",
+  "hdmasterfingerprint": "5e174bde",
+  "labels": [
+    ""
+  ]
+}
+```
+
+The most important field to focus on is `hdkeypath` that contains derivation path 
+of our key. In the example it is `84h/1h/0h/0/0` (the intilal `m/` can be ignored).
+
+Next, list all descriptors in the wallet, ensuring that private keys are included 
+in the output:
+
+```shell
+docker exec -it bitcoind bitcoin-cli -chain=regtest -rpcuser=user -rpcpassword=pass listdescriptors true
+```
+
+The terminal should produce output similar to the following:
+
+```json
+{
+  "wallet_name": "covenant-wallet",
+  "descriptors": [
+    {
+      "desc": "wpkh(tprv8ZgxMBicQKsPe9aCeUQgMEMy2YMZ6PHnn2iCuG12y5E8oYhYNEvUqUkNy6sJ7ViBmFUMicikHSK2LBUNPx5do5EDJBjG7puwd6azci2wEdq/84h/1h/0h/0/*)#sachkrde",
+      "timestamp": 1732624709,
+      "active": true,
+      "internal": false,
+      "range": [
+        0,
+        1000
+      ],
+      "next": 1,
+      "next_index": 1
+    }
+    ...
+  ]
+}
+
+```
+
+The most important field to note is the `desc` value:
+
+```json
+"desc": "wpkh(tprv8ZgxMBicQKsPe9aCeUQgMEMy2YMZ6PHnn2iCuG12y5E8oYhYNEvUqUkNy6sJ7ViBmFUMicikHSK2LBUNPx5do5EDJBjG7puwd6azci2wEdq/84h/1h/0h/0/*)#sachkrde"
+```
+
+Here, you can see the string starting with `tprv8ZgxMBicQKsPe9aCeUQgMEMy2YMZ6PHnn2iCuG12y5E8oYhYNEvUqUkNy6sJ7ViBmFUMicikHSK2LBUNPx5do5EDJBjG7puwd6azci2wEdq`is the **base58-encoded master private key** of the covenant wallet. This key is critical for signing operations and should be securely stored.
+
+#### Deriving the Covenant Private Key from the Master Key
+
+You can derive the covenant private key from the master key by performing a **BIP32 derivation**. The `covenant-signer`repository includes a command to accomplish this:
+
+```shell
+covenant-signer derive-child-key \ tprv8ZgxMBicQKsPe9aCeUQgMEMy2YMZ6PHnn2iCuG12y5E8oYhYNEvUqUkNy6sJ7ViBmFUMicikHSK2LBUNPx5do5EDJBjG7puwd6azci2wEdq \ 84h/1h/0h/0/0
+```
+
+The output will display the derived private and public keys:
+
+```shell
+Derived private key: fe1c56c494c730f13739c0655bf06e615409870200047fc65cdf781837cf7f06
+Derived public key: 023a79b546c79d7f7c5ff20620d914b5cf7250631d12f6e26427ed9d3f98c5ccb1
+```
+
+As seen, the **Derived Public Key**:
+
+```
+023a79b546c79d7f7c5ff20620d914b5cf7250631d12f6e26427ed9d3f98c5ccb1
+
+```
+
+Matches the public key obtained earlier using the `getaddressinfo` command.
+
+#### Importing the Derived Private Key into the Cosmos Keyring
+
+The derived private key can now be imported into the Cosmos keyring. Use the 
+following command:
+
+```shell
+babylond keys import-hex cov fe1c56c494c730f13739c0655bf06e615409870200047fc65cdf781837cf7f06
+```
+
+## 7. Verifying your setup
+
+To confirm that the import was successful, run:
+
+```shell
+babylond keys show cov
+```
+
+The output will display the details of the imported key:
+
+```shell
+    address: bbn1azasawj3ard0ffwj04zpxlw2pt9cp7kwjcdqmc
+    name: cov
+    pubkey: '{"@type":"/cosmos.crypto.secp256k1.PubKey","key":"Ajp5tUbHnX98X/IGINkUtc9yUGMdEvbiZCftnT+Yxcyx"}'
+    type: local
+
+```
+
+Here, the `key` field contains the base64-encoded public key. After decoding, 
+this key:
+
+```shell
+023a79b546c79d7f7c5ff20620d914b5cf7250631d12f6e26427ed9d3f98c5ccb1
+```
+
+Matches the public key derived earlier and seen in the outputs of `getaddressinfo` and `derive-child-key`.
+
+Congratulations! You have successfully imported your keys from the prior setup 
+and verified your setup for the covenant emulator.