Destination Tag – What is it and how does it work?


We will be discussing about Destination Tag Technology, a series of numbers that could drag you to a whole lot of trouble, if entered wrong.

Destination Tag is a short code that assigns transactions to a certain account. In simple terms, this technology allows centralized cryptocurrency service providers to distinguish each transactions and identify a specific one.

Popular cryptocurrencies that utilize this technology are XRP, Stellar Lumens [XLM], EOS, Monero [XMR], and Steem.

For transactions in XLM, EOS, and Steem, this technology is referred to as Memo. While transactions in XMR, the technology is known as payment ID. Despite the different names, the technology serves the same purpose.

Now, you must be wondering why this technology was implemented in the first place?

This is because centralized services usually have one single address for these coins.

Thereby, all the users of the platform also have the same address. And, the only way to tell each transaction apart with the destination tag, a short series of numerical or alpha-numerical description.

This technology is not necessarily required when a user is sending cryptocurrency to a privately controlled device or storage place. This includes a personal wallet, with the user having control over the private keys and the public keys.

Now, what happens when you enter a wrong destination tag or fail to enter it entirely?

Heads up: It is not permanently lost like how it would be with a Bitcoin transaction, wrong address, gone coins.

With these coins, it would likely be end up with a different user who has that particular tag or with the centralized service provider.

The only way to retrieve your tokens would be to reach out to the platform with the problem. Post this, the exchange will ask you make a test transaction to the correct destination tag to prove your ownership over the wallet. Once this is successfully proved, the coins will be sent back you

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