TL;DR
A PSBT is a standard file format for a bitcoin transaction that isn’t fully signed yet. Sparrow creates it, each hardware wallet adds a signature, and once two signatures are in, Sparrow combines them and broadcasts.
The problem it solves
In a multisig, one program builds the transaction and several devices sign it, often from different brands. They all need to understand the same format and have enough information to check what they sign. PSBT (BIP174) is that format.
What’s inside
- The unsigned transaction: which coins are spent and where they go.
- Details about each coin being spent, so a device can check the amount and fee itself.
- Which keys and derivation paths belong to it, so each device knows which key to sign with.
- The signatures added so far.
The journey of a multisig payment
- Sparrow builds the PSBT: 0 of 2 signatures.
- Device one shows amount and destination, you confirm, it adds a signature: 1 of 2.
- Device two does the same: 2 of 2.
- Sparrow finalises the transaction and broadcasts it.
The PSBT can travel over USB, as a file on a microSD card or as QR codes, depending on the device. It contains no private keys, so it can’t be used to steal your coins. It does show amounts, addresses and key details, so don’t share it with anyone.
Why you still check the screen
The PSBT comes from your computer. The device’s screen is where you confirm that the amount and address are what you meant. See step 9.