Sparrow Wallet 2/3 PSBT Multi-sig

Keystone firmware versions V1.1.1 (BTC-Only) or newer supports PSBT Muti-signature functions. This instruction here will show how to create a 2/3 PSBT Multi-signature wallet with Keystone, Coldcard and a SeedPicker as 3 participant co-signers, we will use here Sparrow V1.4.2 as a watch-only wallet, let’s see it all in detail.

I. Preparation

1. Firmware version V1.1.1 (BTC-Only) or newer running on Keystone Essential or Pro. Create recovery phrase A.

(Please read How to upgrade firmware for more details.)

2. Coldcard upgraded to firmware version V2.1.0 or newer. Create recovery phrase B.

3. SeedPicker run on an offline PC/Mac. Create recovery phrase C.

4. Sparrow Wallet V1.4.2 or newer running on an online PC/Mac.

5. MicroSD card (≤512GB; Default FAT32 format).

How to Format a MicroSD Card to FAT32?

II. Create a 2/3 multisig wallet with Keystone, Coldcard and SeedPicker

- Export the required Xpub to a microSD card

1. Export Keystone’s Xpub to a microSD card

1) Insert the microSD card into your Keystone;

2) Tap [Menu] > [Multisig Wallet] > Press the [•••] button on the top right corner > [Show/Export Xpub].

3) Touch [Export All] > [Export] > Save the Xpub of recovery phrase A as a .json file to the microSD card.

2. Export Coldcard’s Xpub to a microSD card

1) Take out the microSD card from Keystone and insert it into your Coldcard.

2) On Coldcard: [Settings] > [Multisig Wallets] > [Export XPUB].

3) Confirm (√) and save the Xpub of recovery phrase B as a .json file (e.g. xxcp-5271C071.json) to MicroSD card.

3. Export SeedPicker’s Xpub to a microSD card

1) Take out the microSD card from Coldcard and insert it into your PC/Mac.

2) Save the Xpub of recovery phrase C as a .json file to the MicroSD card.

3) Edit the SeedPicker’s Xpub file according to Keystone's Xpub file format. The steps are as follows:

a. Let's see Xpub file template required by Keystone.

b. "xfp" means the fingerprint.

c. Edit the SeedPicker’s Xpub file like the template shown above and save it.

4. After the previous steps, you will get 3 files on your microSD card.

Let’s check what’s in the microSD card now:

- Create a multi-signature wallet on Sparrow Wallet

1. Creating a new wallet

1) Run Sparrow and click on [File] > [New Wallet] > Enter a name for the wallet > [create a new wallet] > [Policy Type choose] > choose [Multi Signature].

2. Import Xpub to Sparrow Wallet and create three keystores

1) Insert the microSD card into your PC/Mac.

2) Choose [Keystore 1] > [Airgapped Hardware Wallet] > [Keystone Multisig] > [Import File] > Select file “ccxp-748CC6AA.json” > [Open].

Tips: Keystone also can be imported by scanning the QR code.

3) Repeat step (2) to create the other two keystores and when done click on [Apply].

Note: When importing the Seedpicker Xpub, we suggest you choose the “Keystone Multisig” option but select the file of Seedpicker Xpub (recovery phrase C), this way the third keystore will show as “Keystone 2”.

- Import the multisig wallet file to Keystone

1. Export the multisig wallet file (for Keystone) to the microSD card.

2. Insert the microSD card into your Keystone.

3. Touch [Menu] > [Multisig Wallets] > [Import Multisig Wallet].

4. Select the file “Sparrow Multisig-Keystone.txt”. Check the wallet info and click [Understood] > [Confirm].

- Import multisig wallet file to your Coldcard

1. On Sparrow Wallet: Export the multisig wallet file (for Coldcard) to the microSD card.

2. Take out the microSD card from PC/Mac and insert it into Coldcard.

3. On Coldcard: [Menu] > [Setting] > [Multisig Wallets] > [Import from SD] > Confirm file “Sparrow Multisig-coldcard.txt” > Press “√“ > Import multisig wallet successfully.

III. Receiving bitcoin to the 2/3 multisig address

1. On Sparrow Wallet: Click [Receive], Sparrow will display the receiving address. (You can also go into the Addresses menu and use any address displayed, but we mainly recommend using the ones via Receive.)

2. On Keystone: Touch [Addresses] to display the receiving addresses.

IV. Sending bitcoin from the 2/3 multisig wallet (Keystone & Coldcard)

Generate the multisig transaction on a watch-only wallet (Sparrow Wallet) by scanning unsigned multisig transaction data or exporting unsigned multisig transaction files to a MicroSD card.

1. Create a multisig transaction on Sparrow Wallet

1) Click on [Send] > Set the receive address, Label, amount, and fee > Click on [Create Transaction].

2) Click on [Finalize Transaction for Signing].

2. Partially sign with Keystone

Tips: Here users can choose to sign the transaction via QR code or file.

- Option 1: Via QR code

① On Sparrow Wallet: Click [Show QR] > Sparrow Wallet displays the unsigned transaction data in a QR code format.

② Touch the scanning icon in the top right corner of the Keystone main page and scan the QR code displayed by Sparrow.

③ Touch [Sign] > Enter the password > Tap [Confirm] and authorize the transaction. The device will then show the signed transaction data in QR code format.

④ Click [Scan QR] on Sparrow Wallet, then scan the QR code shown on Keystone.

OPTIONAL: If your computer device has no camera, you can use the Keystone to scan the QR code displayed on screen and then generate the signed transaction file onto a microSD card. The message to export to the microSD card should display underneath the QR code displayed on the device with underlined text. The specific steps are as follows.