Sparrow Wallet.
The complete setup and usage guide.

Wallet software UIs change between versions. The conceptual flow described below (generate seed, verify words, set PIN, connect to Sparrow, label UTXOs, sign PSBTs) is stable. If a specific button or menu position differs from what you see, check the current Sparrow documentation at sparrowwallet.com/docs for the version you have installed.

Section 1 · What Sparrow is and is not

Sparrow is a desktop Bitcoin wallet. It manages your keys (or connects to a hardware wallet that manages them). It does not hold your Bitcoin: Bitcoin is on the blockchain. Sparrow reads the blockchain and signs transactions verify×DON'T TRUST, VERIFYClaim: Sparrow Wallet is open source, supports hardware wallets, and connects to user's own Electrum server.Verify at: sparrowwallet.com ↗ · GitHub source ↗Always download Sparrow from the official site and verify the signature..

Sparrow vs mobile wallets: more powerful and private. Requires a desktop or laptop. Not for quick daily spending (Lightning wallets are for that). For long-term holdings, Sparrow is the right tool.

Section 2 · Setup with a hardware wallet

Ledger

1. Connect Ledger via USB.
2. Open Ledger Live to unlock the Bitcoin app.
3. In Sparrow: File > New Wallet > Connected Hardware Wallet.
4. Follow the on-screen pairing.
5. Select the account derivation path. Native SegWit (bc1 addresses) recommended for lowest fees.

Trezor

Similar process. Connect via USB. No separate app needed. Browser interface handles signing.

Coldcard (most advanced)

• Air-gapped signing: export the wallet via microSD card.
• Sparrow imports the xpub from the card.
• Transactions are signed on the Coldcard (never connected to internet) and returned via microSD as a PSBT (Partially Signed Bitcoin Transaction).

Section 3 · Connecting to your own node

For maximum privacy, Sparrow should connect to YOUR Electrum server, not a public one.

Settings > Server > Private Electrum

• If your node is local: enter your local IP and Fulcrum or electrs port.
• If using Tor: enter the .onion address of your Electrum server.

Why this matters: when Sparrow connects to a public Electrum server, the server operator sees your wallet's xpub. They can see all your addresses and balances. With your own node, no one outside your home network sees your queries. See Running a Bitcoin Node: Why and How.

Section 4 · UTXO labeling and coin control

This is where Sparrow distinguishes itself. UTXOs (Unspent Transaction Outputs) are the "coins" in your wallet. Each UTXO has a history.

Why labeling matters

• Bitcoin is pseudonymous, not anonymous.
• Chain analysis links addresses.
• If you receive Bitcoin from a KYC exchange (Coinbase, River), that UTXO is linked to your identity.
• If you combine that UTXO with one from elsewhere in a single transaction, you have linked both to your identity.
• Coin control prevents this by letting you choose exactly which UTXOs you spend.

How to label in Sparrow

• In the UTXOs tab: right-click any UTXO and add a label.
• Useful labels: "River DCA 2026-01," "Mining payout," "Gift from friend."
• Anything tagged "KYC - Exchange" should not be combined with "No-KYC" UTXOs.

When creating a transaction, Sparrow shows all UTXOs. Uncheck UTXOs you do not want to include. Send only from the appropriate source. See UTXO management deep dive.

Section 5 · PSBT workflow (air-gapped)

A PSBT (Partially Signed Bitcoin Transaction) is a transaction that has been constructed but not yet signed.

Workflow with Coldcard

1. In Sparrow: create the transaction.
2. Save as a PSBT file to a microSD card.
3. Insert microSD into the air-gapped Coldcard.
4. Review and sign on Coldcard.
5. Return microSD to computer.
6. In Sparrow: load the signed PSBT and broadcast.

This workflow means the private key never touches an internet-connected device.