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2025-04-22 23:35:05For Secure Inheritance Planning and Offline Signing
The setup described ensures that any 2 out of 3 participants (hardware wallets) must sign a transaction before it can be broadcast, offering robust protection against theft, accidental loss, or mismanagement of funds.
1. Preparation: Tools and Requirements
Hardware Required
- 3× COLDCARD Mk4 hardware wallets (or newer)
- 3× MicroSD cards (one per COLDCARD)
- MicroSD card reader (for your computer)
- Optional: USB data blocker (for safe COLDCARD connection)
Software Required
- Sparrow Wallet: Version 1.7.1 or later
Download: https://sparrowwallet.com/ - COLDCARD Firmware: Version 5.1.2 or later
Update guide: https://coldcard.com/docs/upgrade
Other Essentials
- Durable paper or steel backup tools for seed phrases
- Secure physical storage for backups and devices
- Optional: encrypted external storage for Sparrow wallet backups
Security Tip:
Always verify software signatures before installation. Keep your COLDCARDs air-gapped (no USB data transfer) whenever possible.
2. Initializing Each COLDCARD Wallet
- Power on each COLDCARD and choose “New Wallet”.
- Write down the 24-word seed phrase (DO NOT photograph or store digitally).
- Confirm the seed and choose a strong PIN code (both prefix and suffix).
- (Optional) Enable BIP39 Passphrase for additional entropy.
- Save an encrypted backup to the MicroSD card:
Go to Advanced > Danger Zone > Backup. - Repeat steps 1–5 for all three COLDCARDs.
Best Practice:
Store each seed phrase securely and in separate physical locations. Test wallet recovery before storing real funds.
3. Exporting XPUBs from COLDCARD
Each hardware wallet must export its extended public key (XPUB) for multisig setup:
- Insert MicroSD card into a COLDCARD.
- Navigate to:
Settings > Multisig Wallets > Export XPUB. - Select the appropriate derivation path. Recommended:
- Native SegWit:
m/84'/0'/0'(bc1 addresses) - Alternatively: Nested SegWit
m/49'/0'/0'(starts with 3) - Save the XPUB file to the MicroSD card.
- Insert MicroSD into your computer and transfer XPUB files to Sparrow Wallet.
- Repeat for the remaining COLDCARDs.
4. Creating the 2-of-3 Multisig Wallet in Sparrow
- Launch Sparrow Wallet.
- Click File > New Wallet and name your wallet.
- In the Keystore tab, choose Multisig.
- Select 2-of-3 as your multisig policy.
- For each cosigner:
- Choose Add cosigner > Import XPUB from file.
- Load XPUBs exported from each COLDCARD.
- Once all 3 cosigners are added, confirm the configuration.
- Click Apply, then Create Wallet.
- Sparrow will display a receive address. Fund the wallet using this.
Tip:
You can export the multisig policy (wallet descriptor) as a backup and share it among cosigners.
5. Saving and Verifying the Wallet Configuration
- After creating the wallet, click Wallet > Export > Export Wallet File (.json).
- Save this file securely and distribute to all participants.
- Verify that the addresses match on each COLDCARD using the wallet descriptor file (optional but recommended).
6. Creating and Exporting a PSBT (Partially Signed Bitcoin Transaction)
- In Sparrow, click Send, fill out recipient details, and click Create Transaction.
- Click Finalize > Save PSBT to MicroSD card.
- The file will be saved as a
.psbtfile.
Note: No funds are moved until 2 signatures are added and the transaction is broadcast.
7. Signing the PSBT with COLDCARD (Offline)
- Insert the MicroSD with the PSBT into COLDCARD.
- From the main menu:
Ready To Sign > Select PSBT File. - Verify transaction details and approve.
- COLDCARD will create a signed version of the PSBT (
signed.psbt). - Repeat the signing process with a second COLDCARD (different signer).
8. Finalizing and Broadcasting the Transaction
- Load the signed PSBT files back into Sparrow.
- Sparrow will detect two valid signatures.
- Click Finalize Transaction > Broadcast.
- Your Bitcoin transaction will be sent to the network.
9. Inheritance Planning with Multisig
Multisig is ideal for inheritance scenarios:
Example Inheritance Setup
- Signer 1: Yourself (active user)
- Signer 2: Trusted family member or executor
- Signer 3: Lawyer, notary, or secure backup
Only 2 signatures are needed. If one party loses access or passes away, the other two can recover the funds.
Best Practices for Inheritance
- Store each seed phrase in separate, tamper-proof, waterproof containers.
- Record clear instructions for heirs (without compromising seed security).
- Periodically test recovery with cosigners.
- Consider time-locked wallets or third-party escrow if needed.
Security Tips and Warnings
- Never store seed phrases digitally or online.
- Always verify addresses and signatures on the COLDCARD screen.
- Use Sparrow only on secure, malware-free computers.
- Physically secure your COLDCARDs from unauthorized access.
- Practice recovery procedures before storing real value.
Consider
A 2-of-3 multisignature wallet using COLDCARD and Sparrow Wallet offers a highly secure, flexible, and transparent Bitcoin custody model. Whether for inheritance planning or high-security storage, it mitigates risks associated with single points of failure while maintaining usability and privacy.
By following this guide, Bitcoin users can significantly increase the resilience of their holdings while enabling thoughtful succession strategies.