A Partially Signed Bitcoin Transaction is a structured exchange format that carries a proposed transaction and supporting information needed by different participants. It separates the work of creating a transaction, adding relevant data, signing, combining results, finalizing, and extracting a broadcastable transaction. This is particularly useful when private keys live on separate devices or several participants must approve a spend. A PSBT can be useful before any signature exists; partially signed describes the workflow rather than a requirement that it already contain one.

A watch-only computer can construct a payment proposal and transfer its PSBT to a hardware signer. The signer checks the information it needs, displays the destination and amount, and adds its authorization without exporting its private key. In a multisignature arrangement, another signer may repeat that process before the result can be finalized. The transport could be a file or a supported encoded representation. These are coordination choices; the final transaction still must satisfy Bitcoin's ordinary spending and consensus rules.

Signers should not blindly trust every label or piece of metadata in a proposal. They must verify relevant inputs, outputs, amounts, fees, and change handling according to their supported policy. The format can also expose wallet information, so exchanging it is not necessarily privacy-neutral. BIP-370 defines PSBT version 2 with different structural choices from the original format, making version compatibility important. A successful import does not mean all participants support the same transaction features or that the requested payment matches the human signer's intention.