For some reason or other that I can't remember, I ended up with ~17.99 Ripple (XRP) sitting in one of my multi-crypto wallets. Perhaps a friend sent it to me; I don't recall. Not being a fan of Ripple Labs (the project has made statements about having an interest in and/or supporting developing CBDCs, which are anathema to me), I tried to get rid of it by exchanging it through Luno. However, there was an address format incombatibility. I tried exchanging it through Exodus, but had insufficient balance (Exodus requires a minimum of 100 XRP for exchange). I've been stuck with it ever since, until I had the bright idea of exchanging it for Nano (XNO) through NanSwap, which requires a minimum of ~5.3 XRP. (Technically, I'm still stuck with ~10 XRP which can't be exchanged or sent because of stupidity on the part of Ripple Labs, but that's better than being stuck with all ~17.99.)

Everything was going well until Exodus demanded I put in a Destination Tag before it would send the ~7.99 XRP to the NanSwap address. Well, that was new to me, having never been asked for one before. I figured it was like any other memo text and typed "NanSwap", but no, that was invalid. It had to be a specific code associated with NanSwap's multi-purpose address. Fortunately, NanSwap provided the code for the exchange, which succeeded. I now have ~5 more XNO.

Why, Larry, Why, Do You Make These Demands?

TL;DR: Since many centralised exchanges (such as Coinbase) use one address for all transactions in a particular cryptocurrency, a memo/tag helps them keep track of which address sent it and to which amounts in that cryptocurrency should be returned in the event of an exchange/transaction failure.

That's all well and good, but why the need for specific Destination and Source Tags? According to what I have read, they're a bit like SWIFT purpose codes (or whatever they're called) for multi-purpose accounts/addresses. (If you've ever done an international money exchange, such as receiving dollars from PayPal to a bank account using a different fiat currency, you've likely been prompted to choose the numeric code appropriate to the nature/purpose for which you're receiving the money. I've had to deal with that when doing freelance Web development for clients in the UK and USA.)

"Source tags and destination tags are a feature of XRP Ledger payments that can indicate specific purposes for payments from and to multi-purpose addresses. Source and destination tags do not have direct on-ledger functionality; source and destination tags merely provide information about how off-ledger systems should process a payment. In transactions, both source and destination tags are formatted as 32-bit unsigned integers.

Destination tags indicate the beneficiary or destination for a payment. For example, a payment to an exchange or stablecoin issuer address can use a destination tag to indicate which customer to credit for the amount of the payment in that business's own systems. A payment to a merchant could indicate what item or cart the payment is buying.

Source tags indicate the originator or source of a payment. Most commonly, a Source Tag is included so that the recipient of the payment knows where to send a return, or “bounced”, payment."
 — XRP Ledger

What Happens if I Enter the Wrong Tag?

Well, one of three things happens:

• As in my case when I entered "NanSwap", the wallet informed me that the tag was invalid and didn't send any XNO to the exchange.
• The transaction goes to the multi-purpose address, but gets allocated under the wrong "purpose" classification. In that case, you'll have to contact the exchange to correct that.
• In the worst case, the XRP somehow goes to the wrong address (IDK how/why) and your XRP gets lost.

Thumbnail image: Screenshot from a successful transaction on NanSwap