What is a destination tag (label / memo)?

Modified on Mon, 6 Jul at 2:56 PM

A Destination Tag (also known as a Destination Label or Memo) is an additional identifier for a wallet address, which some cryptocurrencies require to ensure your funds reach the correct recipient. This is especially important when sending cryptocurrencies to centralized platforms like exchanges (e.g., 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 is not the case for all coins.

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 respective protocols and networks, often use a single address for all customers on 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 allocated 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 it wouldn't know which mailbox or door to go to.

How to Indicate the Destination Tag

When you are about to send a cryptocurrency that requires a Destination Tag from your Bit2Me account (e.g., 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 where you generally do not need to include a destination tag is when you send cryptocurrencies to a private wallet that you fully control. A private wallet is one where 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 drive) that store your keys offline.

Important: It is your sole 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 cryptocurrency as a test before attempting to send a significant amount. An error in not including or incorrectly entering a Destination Tag could result in the irrecoverable loss of your funds.