Sparrow Wallet.
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 blockchainBlockchainA public transaction ledger, grouped into blocks that each link to the one before. Every Bitcoin full node checks each block itself and follows the valid chain with the most accumulated proof of work. Recent blocks can occasionally be replaced (a reorganization); the number of computers does not decide validity.Full definition. 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 ↗ Source 1 in the list belowAlways 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. Close Ledger Live, unlock the device and open the Bitcoin app on it.
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. Signing happens on the Trezor itself.

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 every address your wallet queries. 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

Coin control is what sets Sparrow apart. UTXOs (Unspent Transaction Outputs) are the "coins" in your wallet, and each one carries its own history.

Why labeling matters

• Bitcoin is pseudonymous, not anonymous.
• Chain analysis links addresses.
• If you receive Bitcoin from a KYCKnow Your Customer (KYC)Identity checks that banks, brokers and regulated Bitcoin exchanges must run under anti-money-laundering rules, collecting your name, address, date of birth, an ID number and often a photo ID. Buying through a KYC exchange links your identity to the bitcoin you buy and the addresses you withdraw it to.Full definition 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 DCADollar-cost averaging (DCA)Investing a fixed amount on a regular schedule, such as $50 every payday, regardless of price. It spreads out when money enters the market and buys more units when prices are low, but it does not guarantee a better price than investing all at once, a profit or protection against loss.Full definition 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 keyPrivate keyA secret number that proves the right to spend bitcoin by signing transactions. Most wallets derive their private keys from a seed phrase backup. The phrase is not itself a private key, but it can regenerate them, so unless the wallet also needs a passphrase or other keys, anyone who has it can spend the coins.Full definition never touches an internet-connected device.