Toast the peanuts in a dry skillet over medium heat until golden brown. Let cool, then coarsely grind.
Mince the garlic finely. Sauté it in a little oil until fragrant, being careful not to burn it.
In a saucepan, combine the ground peanuts, coconut milk, water, soy sauce, brown sugar, and rice vinegar.
Add the sautéed garlic and chili flakes. Simmer over low heat for 10-15 minutes, or until the sauce has thickened to your liking.
Taste and adjust the seasonings as needed. If the sauce is too thick, add a little more water to reach the desired consistency.
Serve with grilled satay skewers, or use as a dipping sauce for vegetables and noodles.
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