A Destination Tag is an additional functionality of some cryptocurrency addresses. One of those cryptocurrencies, for example, is XRP.
In the case of XRP (Ripple), a Destination Tag is a unique 9-digit number assigned to each Ripple (XRP) account. It is used to identify the final recipient of a Ripple transaction.
Why is it necessary?
Normally, for cryptocurrencies like Bitcoin, Ethereum, and thousands more, the cryptocurrency platforms give each user a unique address.
But for cryptocurrencies like XRP (Ripple), Stellar, EOS or Cosmos, it’s not the same. Most of the exchanges in this case use a single address for all their clients.
So here’s where the Destination Tag comes into play. When a transaction arrives at that address, the Destination Tag is used to determine which single user it should be assigned to in order to complete the transaction.
To understand it better, we leave you an analogy:
The address to which you send one of these cryptocurrencies can be compared to the address of an apartment building. The Destination Tag identifies which specific apartment you live in.
How to indicate the destination Tag?
In the wallet of your user account, when you want to send a cryptocurrency to the network that supports Destination Tag (for example XRP), a form will appear where you must indicate the destination address. Additionally you can indicate the Destination Tag, which is optional.
When a Destination Tag is not required?
The only exception, when a destination tag is not required, is when sent to a privately controlled cryptocurrency storage device.
A private wallet is one that the owner controls completely (he has custody of both the public and private keys). Examples of a private wallet include (but not limited to):
It is your responsibility to determine if the recipient's wallet requires a Destination Tag. When in doubt, Bit2Me strongly recommends to send first a small amount of cryptocurrency as a test before sending a significant amount.
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