BIP 174 (PSBT)

BIP 174 defines the partially signed bitcoin transaction, or PSBT, a standard file format for a transaction that is still collecting signatures. Proposed in 2017 and supported in Bitcoin Core since version 0.17, it lets wallets, hardware devices, and coordination software from different vendors pass an unfinished transaction between them safely.

Why it matters

Serious bitcoin custody separates the machine that builds a transaction from the machine that holds the keys. PSBT is the envelope that makes this separation practical: an online watch-only wallet drafts the payment, an offline signer approves it, and neither needs to trust the other's software. It is equally essential for multisignature setups, where a transaction may need signatures from 2 or 3 devices in different locations, each adding its signature to the same PSBT in turn. Before the standard, every wallet vendor had a proprietary format and cross-vendor multisig was nearly impossible.

How it works

A PSBT wraps the draft transaction in key-value maps that carry everything a signer needs to verify what it is signing: the coins being spent, their amounts and scripts, and the derivation paths of the keys involved. Each participant adds signatures without altering the underlying transaction, and a final step assembles the completed pieces into a valid transaction for broadcast. PSBTs commonly travel as Base64 text, QR codes, or files on a microSD card, which is what makes fully air-gapped signing workflows possible. The format turned bitcoin self-custody from a single-device act into a protocol between machines that never need to meet.