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Remove stems from the datil peppers and roughly chop them into similar-sized pieces. Wear food-safe gloves when handling peppers and wash hands and tools thoroughly afterward. Keep seeds for maximum heat or remove some inner tissue for a milder sauce.
Add chopped datil peppers, tomato paste, apple cider vinegar, lemon juice, honey, garlic powder, paprika, and salt to a saucepan. Stir over medium heat until the mixture reaches a brief boil, then reduce heat and simmer for about 20 minutes until the peppers soften and the sauce becomes thick and cohesive.
Let the sauce cool until it is no longer vigorously steaming. Transfer to a blender or food processor and blend until smooth. Add water gradually while blending until the sauce reaches the preferred thickness.
Allow the finished sauce to cool completely, then transfer it into a clean glass bottle or airtight container. Store in the refrigerator.