In a saucepan, combine the water, butter, sugar, and salt. Heat over medium heat, stirring occasionally, until the sugar has dissolved and the butter has melted. Remove from heat and stir in the vanilla extract or vanilla bean paste. Add the flour and mix until a dough forms.

Mix the dough with spatula for 5-7 minutes, until the dough is smooth and elastic.

Place the dough in a mixing bowl, and let it rest for 20 minutes or until cooled completely.

Once cooled, crack in the egg and mix by spatula for 4-5 minutes, until combined and the dough is smooth.

Heat about 2-3 inches of oil in a deep frying pan over medium-high heat until it reaches 375°F.

Grease a piping bag with some oil to prevent the dough from sticking. Using a piping bag fitted with a star tip,Pipe the churros onto a baking tray first, pipe out a 5-6 inch long churro over the parchment paper. Cut the parchment paper lengthwise and carefully drop the churro pieces along with parchment paper into the hot oil.

Don't overcrowd the pan. Fry for 2-3 minutes on each side, until the churros are golden brown and puffed up.

In a shallow dish, mix together the granulated sugar and cinnamon powder. While the churros are still warm, toss them in the cinnamon sugar mixture to coat.

In a small saucepan, heat the heavy cream over medium heat until it starts to simmer. pour over the chocolate chips. Let it sit for 2-3 minutes, then stir until the chocolate is melted and smooth. Stir in the vanilla extract and butter until combined. Remove from heat.