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What would happen if I used Bitcoin Knots to run the online node but use Sparrow wallet to manage private keys and craft the transactions (to be broadcasted on the Bitcoin Knots node)?
Do you mean use Bitcoin Knots as server?
If so, there shouldn't be any issue for using Knots in place of Core as "
Bitcoin Core" server option.
I mean, since it's an old wallet.dat, will Sparrow wallet software have any problems?
This is where the question became confusing, do you mean loading the old wallet.dat to Sparrow?
Because you mentioned a wallet.dat file, yet, you intended to use Sparrow as the wallet and Knots as server.
The actual auto-setup that will happen is, Sparrow will create a descriptor wallet named "
cormorant" in Knots for you that will contain your Sparrow wallet's watch-only descriptors (
containing xpubs).
Any other wallet it already has will not be affected nor required by using it as server for Sparrow.