PSBT
A Partially Signed Bitcoin Transaction (PSBT) is a standardized format (BIP174) for constructing and passing unsigned or partially signed transactions between wallets and signing devices. It enables air-gapped signing and multisig coordination.
How It Works
PSBT was introduced with BIP174 to solve a fundamental coordination problem: how do you construct a Bitcoin transaction on one device and sign it on another? Before PSBT, each wallet had its own proprietary format for this workflow. PSBT standardized it, making any compliant wallet compatible with any compliant signing device.
The lifecycle of a PSBT starts with a wallet coordinator (like Sparrow or Nunchuk) that constructs a transaction with all the necessary inputs, outputs, and metadata. This unsigned PSBT is then transferred to a signing device — via QR code, microSD card, or USB. The signing device verifies the transaction details on its screen, signs its portion, and returns the partially signed PSBT. In a multisig setup, the PSBT may need to visit multiple signing devices before it has enough signatures to be finalized and broadcast.
PSBTs carry rich metadata including UTXO information, derivation paths, and signer data. This allows the signing device to verify that the transaction is correct without needing access to the full blockchain. The format supports multiple signers, making it essential for multisig workflows. Every serious hardware wallet (like COLDCARD) and wallet coordinator now supports PSBT, and it has become the universal language for Bitcoin transaction signing.
Key Points
- Standardized format (BIP174) for passing transactions between wallets and signers
- Enables air-gapped signing via QR codes or microSD without internet connectivity
- Essential for multisig workflows where multiple devices must sign sequentially
- Carries metadata allowing signing devices to verify transactions independently
- Universally supported across modern hardware wallets and wallet coordinators