In a medium saucepan, combine the tomato paste, apple cider vinegar, powdered erythritol, Worcestershire sauce, liquid smoke, smoked paprika, garlic powder, onion powder, cayenne pepper, kosher salt, dry mustard, chili powder, and water over medium heat.
Whisk until the ingredients are well combined and the erythritol has dissolved.
Bring the mixture to a simmer and let it cook for about 10-15 minutes, stirring occasionally until the sauce has thickened to your desired consistency.
Remove the saucepan from heat and stir in the unsalted butter and crushed red pepper flakes, if using.
Taste the sauce and adjust the seasoning as needed.
Once you've achieved the desired flavor and consistency, transfer the sauce to a jar or container and let it cool to room temperature.
Refrigerate the sauce until ready to use.
Enjoy this delicious sauce on your favorite grilled meats or vegetables and impress your friends and family with your keto-friendly and healthy BBQ creation!