Add vinegar, shallots, and tarragon to a small saucepan. Bring to a boil, then reduce to simmer for about 3 to 4 minutes until reduced by about half. Cool to room temperature.
Bring a medium pot of water (half full) to a slow boil.
In a small bowl, add egg yolks, vinegar reduction, water, and hot sauce and whisk until well incorporated.
Place bowl over pot of slow boiling water and continue to whisk ingredients in the bowl until it starts to emulsify and become sauce-like. Alternate whisking on and off heat every 30 seconds to prevent eggs from scrambling.
Then gradually add melted butter, continuously whisking until sauce becomes rich with a ribbony consistency and sets up a bit. Season to taste with salt and freshly ground pepper, as needed. (If too thick, you can add 1 T. of water at a time and whisk until desired consistency is reached.)