Place all ingredients except the last two (cornstarch and water) in your blender. Puree until peppers and garlic are in very fine pieces.
Pour this pepper mixture into large pot. Heat over medium-high heat until peppers and garlic have softened (15-20 min). Stir frequently and watch closely as this mixture can quickly boil over if not watched.
Mix cold water and cornstarch together in a mixing bowl. Pour into boiling pepper mixture and whisk together until thickened (2-3 minutes).
You can either: can it immediately or cool a bit and serve. Store opened sauce in the refrigerator. It lasts in the fridge up to two weeks.