The Destination Tag Is Not Always Optional To Send Ripple XRP Or Stellar XLM To A Wallet Or Exchange

by smoljanovic · Published May 31, 2023 · Updated June 3, 2023

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It is never a good idea to let a large amount of cryptocurrency sit on any centralized exchange. I decided to do some crypto-housekeeping shortly after buying a large sum of Ethereum, Basic Attention Tokens, Bitcoin and Ripple XRP.

I routinely transfer funds from my chaperoned custodial exchange that is tied directly to my 5 physical banks when the funds reach a predetermined threshold.

It was during the process of transferring Ripple XRP from my Uphold account to my Trust Wallet for the first time when I noticed an entry box prompting me for a destination tag. The situation was identical to transacting Stellar XLM so adding details about that would be unnecessary here.

During the transaction process, the presented form advised that The Destination Tag is optional to send Ripple XRP when actually it would be critical in the situation of receiving and when sending to a centralized exchange that requires one.

A Destination Tag According To Uphold

Clicking on ‘Learn more’ offered me the following info:

What is the Destination Tag and How do I use it?

Destination Tags are a feature of XRP Ledger payments and are used to indicate the beneficiary or destination for a payment. The destination tag is used to indicate which customer should be credited for that payment.

Think of the destination tag like a unique memo specific to your XRP ledger address. The destination tag is required when sending any XRP from an external address to your Uphold wallet if the transaction does not have a destination tag, or the destination tag is incorrect it will be rejected by our system.

A Destination Tag According To Logic

You may have noticed that your XRP address of another trader is exactly the same as yours and felt puzzled and felt like a cryptographic-facsimile or a surgically augmented cyborg (cybernetic organism) unit of the Borg Collective. Exchanges often use the same XRP or XLM address for the same users. The only thing that differentiates the users is a destination tag.

I was surprised to find out that the destination tag is actually mandatory for the majority of transactions. The sole purpose of the destination tag is to identify the transaction recipient on a centralized exchange.

Think of it as an apartment full of dwellers to get the idea. The apartment building has a unique address that sets it apart from all the other house or apartment buildings on the same street. The destination tag is like the suite or unit number within each apartment used to identify the individuals in the apartment or other similar complex.

Missing a destination tag or adding an incorrect tag where it is required will result in a failure to transfer funds and dump it in the unassigned transaction pile.

I suspect an unassigned transaction would not be unfixable but the experience would not be pleasant.

Decentralized wallets such as Atomic or Trust wallet do not need a destination tag which is the reason that I have not even noticed it until the End Game.

Wallets Without Destination Tags

One of my favorite multi-cryptocurrency non-custodial and non-control-freak wallets that I use which has a built in Atomic Swap DEX is Atomic wallet. Atomic wallet will bless you with your own wallet addresses making Destination Tags unnecessary. Non-custodial wallets generally have no need to use a destination tag for receiving funds. The option is included in case you are sending the cryptocurrency to a custodial exchange where everyone is part of the Borg and needs a destination tag to set them apart.

Some custodial wallets may force you to add a destination tag even when sending to a non-custodial wallet such as Atomic. If you come across the situation where a transaction insists on a destination Tag, you can give them mine or just add some random numbers. Your funds will still get there from the transporter bays one atom at a time but totally intact.