How does Kaspa's covenant system keep state inside a UTXO?

Kaspa covenants allow a state machine to live entirely inside a UTXO and its script, with no external coordination needed. In most blockchain systems, tracking state over time requires a separate smart contract platform to hold variables. With Kaspa covenants, the state — such as a counter value — is embedded directly in the UTXO's payload, and the script checks that the state was updated correctly before allowing the spend. No outside system is consulted at any point. This matters for beginners because it means Kaspa can support stateful applications using only its native UTXO and script layer.