What is a Destination Tag?

Modified on Fri, 1 Aug at 10:53 AM

A Destination Tag (also known as a Destination Tag or Memo) is an additional identifier to the wallet address, which some cryptocurrencies require to ensure that your funds reach the recipient correctly. This is especially important when you send cryptocurrencies to centralized platforms such as exchanges (for example, Bit2Me).

Why is a Destination Tag Necessary?

Normally, with cryptocurrencies like Bitcoin or Ethereum, exchanges assign a unique wallet address to each user for each cryptocurrency. However, this does not happen with all currencies.

Cryptocurrencies such as XRP (Ripple), Stellar, EOS, Algorand, Celestia, Hedera, Iost, Kava, Ton, Osmosis, Secret Network, Stacks, Terra 2.0, Thorchain, Xpla, Cosmos, and others that operate on their protocols and networks, often use a single address for all customers of an exchange.

This is where the Destination Tag comes into play. When a transaction arrives at that shared address, the Destination Tag serves to identify which individual user the funds should be assigned and credited to. Without this identifier, the exchange would not know which user account to credit the transaction to, which could result in the loss of your funds.

To understand it better, think of the wallet address as the address of an apartment building. The Destination Tag would be the specific apartment number where the recipient lives. Without that apartment number, the mail (or in this case, your funds) would arrive at the building, but would not know which mailbox or door to go to.

How to Indicate the Destination Tag?

When you are going to send a cryptocurrency that requires a Destination Tag from your Bit2Me account (for example, XRP), you will see a form. In addition to the destination address, you will have a field to indicate the Destination Tag. This field is optional, but if the destination wallet requires it, it is crucial that you include it.

When is a Destination Tag NOT Required?

The only situation in which you generally do not need to include a destination tag is when you send cryptocurrencies to a private wallet that you control completely. A private wallet is one in which only you have custody of the public and private keys. Examples of private wallets include:

Desktop Wallets: Software that you download and install on your computer.
Hardware Wallets: Physical devices (like a USB) that store your keys without an internet connection.

Important: It is your absolute responsibility to determine if the recipient's wallet requires a Destination Tag. If you have any doubts, Bit2Me strongly recommends that you send a small amount of cryptocurrencies as a test before attempting to send a significant amount. An error by not including or incorrectly entering a Destination Tag could result in the irrecoverable loss of your funds.