The covenant of grace is the gracious arrangement by which God rescues fallen humanity from sin and misery through the life, death, and resurrection of Jesus Christ. While Reformed traditions agree that this covenant is founded upon an eternal agreement between the Father and the Son, they differ regarding the nature of its administration in the Old and New Testaments.
Because we have brought ourselves under the curse of the law, the covenant of grace is our only hope. According to the 1689 LBCF Ch.7 §2, God freely offers life and salvation to sinners through Jesus Christ, promising the Holy Spirit to all the elect to make them willing and able to believe. This covenant is not a new invention of the New Testament but was revealed progressively, beginning with the promise to Adam, as noted in the 1689 LBCF Ch.7 §3. It is founded entirely upon the eternal transaction between the Father and the Son regarding the redemption of the elect, emphasizing that salvation is by grace alone through faith.
The gospel is the heartbeat of this covenant. From the moment of the Fall, God looked upon sinful, broken people and promised a Redeemer. As written in Genesis 3:15, 'And I will put enmity between thee and the woman, and between thy seed and her seed: he shall bruise thy head, and thou shalt bruise his heel.' This points us directly to Christ, the second Adam, who fulfills the demands of the law that we could never meet. We are indeed more sinful than we dared believe, yet because of the covenant of grace, we are more loved in Christ than we ever dared hope.