Source And Destination Tags
Source And Destination Tags

Source And Destination Tags

Source And Destination Tags

Intro

Importance and use case of Source and Destination Tags.

Video

Topics covered

  • How much reserve the exchanges pay?
  • How exchanges attach meaning to destination and source tags.
  • For the ledger source and destination tags are just an additional piece of information and it doesn’t hold any meaning.
  • What happens if you send payment to an exchange account and forget to include destination tag.
  • Making destination tag a required field.

References

Use-case

There are many use cases for Source and Destination tags, and I’ve talked about some of them in the video.

One another use case is for centralised systems(ex: exchanges): Centralised systems usually have 1 (or couple) address and it identifies its users with unique destination tag.

Problem: Now consider a scenario where one of your user wants to send funds to another user within your own system. i.e., Two of your users want to transaction.

In such a case, the transaction payload will have same address in both Account and Destination fields, the transaction(if submitted to network) fails with following error: temREDUNDANT. Clearly you are not supposed to have same address in both Account and Destination fields in a transaction.

Solution: Use source and destination tags.

Since the transactions will be happening with in your own centralised system, you can just check if both Account and Destination is same(and that the address belongs to you), then look up the source and destination tags in your own database to identify the sender and receiver, and change the balance of them directly in your database, instead of submitting the transaction to the ledger.

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Final tip: Source and destination tags do not have any direct on ledger functionality.
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