PSBT transactions, or Partially Signed Bitcoin Transactions, are a specific format of Bitcoin transaction that allows for partial signing of a transaction.
PSBT transactions are a standardized data format that allows for the communication and exchange of unsigned or partially signed Bitcoin transactions, simplifying the signing process at different times among multiple parties.
The PSBT format was introduced in 2017 with Bitcoin Improvement Proposal 174 and was subsequently improved with version 2 through BIP-370. It is adopted by several Bitcoin wallets, including Bitcoin Core, Electrum, BlueWallet, Sparrow, Samourai, and Wasabi Wallet.
The main goal of PSBT transactions is to simplify and standardize the process of signing Bitcoin transactions, especially when multiple parties and inputs are involved.
PSBT transactions are particularly useful for multi-sig wallets, CoinJoin or PayJoin transactions, CoinSwap, or other types of more complex transactions that require cooperation among multiple parties.
For example, the PSBT standard makes it easier to sign a transaction offline from a cold wallet and then transmit it to the network through a device connected to the Internet.
It also promotes interoperability between different wallets. By using PSBT, a transaction can be created through a watch-only wallet, which does not have access to the private keys needed to sign the transaction. The watch-only wallet can then export the PSBT transaction file, which can be imported into a wallet containing the private keys. Once the transaction is signed, the wallet that performed the signature can export the updated PSBT file and import it into an Internet-connected wallet to broadcast the transaction to the network.
Additionally, PSBT transactions are useful for allowing multiple people to sign a transaction simultaneously. For example, in a multi-sig wallet transaction, multiple people need to sign the transaction before it can be sent. PSBT allows each person to sign the transaction independently, simplifying and speeding up the process.
