BIP 174 (PSBT)
Bitcoin Improvement Proposal (BIP) 174 introduced Partially Signed Bitcoin Transactions (PSBT) as a community standard.
Bitcoin Improvement Proposal (BIP) 174 introduced Partially Signed Bitcoin Transactions (PSBT) as a community standard. PSBT is a standardized format for communicating unsigned or partially signed Bitcoin transactions. PSBT was originally designed to enhance interoperability between wallets and other Bitcoin software, making it easier for a transaction to be constructed by one wallet, transferred to another for signing, and then transferred to a Bitcoin node for broadcasting.
PSBT is also particularly useful for coordinating between parties who wish to sign the same transaction. For example, CoinJoin protocols and multisig outputs require multiple different actors to all sign the same transaction. The PSBT format provides a method for constructing the transaction, passing it between the different signers, and then assembling the final transaction to be broadcast.
BIP 174 is currently widely adopted as a community standard, however it has several downsides, which are currently being addressed by a proposal for PSBT v2.
BIP 174 (PSBT) is a Bitcoin protocol specification that defines technical standards for how Bitcoin software operates. Onramp's Bitcoin glossary provides detailed educational resources on BIP 174 (PSBT) and other protocol-level concepts to help investors understand the technology underpinning their Bitcoin holdings.
Frequently Asked Questions
What is BIP 174 (PSBT)?
BIP 174 (PSBT) is a technical standard in the Bitcoin protocol that specifies how certain operations or data structures should be implemented. It helps ensure interoperability between different Bitcoin software implementations.
Why is BIP 174 (PSBT) important for Bitcoin?
BIP 174 (PSBT) improves Bitcoin's functionality, security, or efficiency. Technical standards like this ensure that all participants in the Bitcoin network follow consistent rules, maintaining network consensus.
How does BIP 174 (PSBT) affect Bitcoin investors?
While BIP 174 (PSBT) operates at the protocol level, Onramp ensures that clients benefit from these technical improvements through secure, up-to-date infrastructure for Bitcoin custody and transactions.
