Guides / Glossary / PSBT
Glossary

PSBT: how a company passes a payment between signers

Partially Signed Bitcoin Transaction: the standard file format for moving an unsigned or part signed payment between people and devices.

Education only

Definition. Partially Signed Bitcoin Transaction: a standard file format for passing an unsigned or part-signed transaction between signers.

How it works

BIP 174 defines the PSBT format. A wallet that wants to make a payment builds the transaction, the coins being spent, the destination, the amount, the change and the fee, and writes it into a PSBT. The file also carries the information each signing device needs to check what it is signing, such as which inputs belong to the wallet and which output is change.

The PSBT is then passed to each signer, by USB, QR code or a memory card. Each device shows the payment details, the signer approves, and the device adds its signature to the file. When enough signatures have been collected, the wallet combines them, finalises the transaction and broadcasts it to the network.

Why it matters for a company

PSBTs are what make multisig practical for a small company. Signers can be in different places, using different brands of hardware signer, and none of them has to trust the computer that built the payment. The file can be emailed or copied without risk to the keys, because it holds no private key material.

The important control is the check on each device screen. Malware on the coordinating computer could change the destination address in the PSBT. A signer who reads the address and amount on the signing device itself, and compares them with an independently confirmed invoice, defeats that attack. The company's policy should say exactly what each signer must check before approving.

Example only, fictional. A finance assistant prepares a PSBT to pay a supplier, saves it to a memory card and sends a message to the two signing directors. Each director inserts the card into their device, confirms the first and last eight characters of the address against the supplier's letter, the amount and the fee, and signs. The assistant combines and broadcasts.

Common mistakes

Sources

Primary sources only. Each link was checked on 9 November 2026. Rules change, so confirm the current version with your adviser.

  1. Bitcoin BIPsBIP 174: Partially Signed Bitcoin Transaction format (PSBT)
  2. Bitcoin developer documentationTransactions guide: public keys, private keys and signatures
  3. Bitcoin BIPsBIP 11: M of N standard transactions (multisig)
Education, not advice.

This is general information and education only. It is not financial, investment, tax, accounting, legal or regulatory advice, and it is not a recommendation to buy, sell or hold bitcoin or any other asset. It does not take account of your circumstances or those of your company. You must obtain your own official professional advice to confirm this information is correct before acting on it.

Rules change. This information is correct to our understanding at the last-reviewed date, but it may be incomplete or out of date, and official sources take precedence. Bitcoin is volatile. A company that buys it could lose some or all of the money it puts in.

Using this site does not create an adviser or client relationship. IoT Financial is not authorised or regulated by the Financial Conduct Authority (FCA) and is not registered with the US Securities and Exchange Commission (SEC) as an investment adviser. Read the full disclaimer.