When sending or receiving tokens on centralized exchanges, you need a destination tag to ensure the funds go to the right person.
But when sending or receiving crypto on decentralized exchanges and crypto wallets, you don’t need a destination tag. With a wallet address, the funds will land in the correct person’s account. Now, let’s see how the concept of destination tags (Memo) works.
What Are Destination Tags?
Destination tags are unique identifiers connected to a user’s wallet to ensure they receive crypto funds transferred to them. Apart from the digital wallet address, a destination tag or memo is an extra information that limits the likelihood of sending crypto to a wrong person.
Centralized Exchanges: Using Destination Tags
Centralized exchanges (CEXs) like Quidax, Coinbase, and Binance usually have one crypto wallet address for multiple users. That means a transaction intended for one person may be sent to another in error.
To differentiate between these users, they use destination tags (or memo tags). So, when sending XRP, XLM, or TON to a centralized exchange, you will often need to include the following:
- A wallet address: This is the public address of the exchange where you are sending the funds.
- A destination tag: This uniquely identifies a recipient’s account within the exchange.
If you fail to include the destination tag in a transaction, it could result in loss of funds or delayed settlements. This is because the exchange won’t know which user should receive the tokens.
If you’re sending XRP to a centralized exchange, the wallet address and destination tag look like this: – Address: rB1234…
– Destination Tag: 1023456
Decentralized Exchanges (DEXs) and Web3 Wallets: No Destination Tags
Unlike CEXs, decentralized exchanges and Web3 wallets like MetaMask or Trust Wallet have unique wallet addresses for their users. That means there’s no need for a special destination tag or memo to identify users.
When sending tokens like XRP, XLM, or TON to or from a DEX or Web3 wallet, you only need the recipient’s wallet address. The transaction will be directly processed using the address.
For instance, if you’re sending XLM using a Web3 wallet, you’ll only need an address like GA12345…
Instead of entering a destination tag, you can input the wallet name in the space provided.
Final Thoughts
Sending cryptocurrencies can be as simple as entering an address and confirming a transaction. But some tokens require destination tags or memos that differentiate one user from another.
Conversely, you don’t need a destination tag for sending coins to decentralized exchanges and crypto wallets. To avoid transaction delays or loss of funds, verify with the recipient to know if they need a destination tag or memo and double-check before sending cryptocurrencies.