PSBT (partially signed bitcoin transaction)

A PSBT, or partially signed bitcoin transaction, is a standard file format in which a transaction travels between software and signing devices, collecting signatures along the way.

BIP-174 describes the format. The file holds everything needed to sign, so the device can be completely offline. In practice it goes like this: software creates the PSBT, a hardware wallet checks and signs it, and the software sends the finished transaction to the network. You can move the file by SD card, cable or QR code.

In multisig, the PSBT is the foundation: the first key adds its signature, the second adds another, and once there are enough signatures the transaction is complete. The specification names several roles, including creator, signer, combiner and finalizer. For the user, these are simply the next steps in the software.

A PSBT isn’t secret in the sense of keys: it contains no private keys. It does reveal the amount, addresses and transaction history, so you don’t send it to random people.

Why it matters for your family

When your family has to recover a 2-of-3 wallet, they don’t pass keys around. They pass a PSBT file that is signed on two devices. Knowing this makes it easier to write the procedure step by step. The layout and its purpose are explained in the guide on 2-of-3 multisig wallets.