Memo & Extra ID: What Are they and What’s Their Importance?

When exchanging some cryptocurrencies, you need to provide additional information for safety reasons.

Different exchanges and wallets use unique terms to refer to the additional identification information. However, that difference in names has no impact on how the security features function.

Read on for more about Memo and Extra ID, and to see how each of them can help protect your transactions.

What is a Memo?

A memo is a term used in the cryptocurrency world to refer to an additional feature required to identify a transaction recipient beyond a wallet address. It ties a transaction to a particular sender and gives the recipient an easy time identifying them.

Note that a few cryptocurrencies use Memo ID. Other digital currencies or exchanges use different types of identifiers. Moreover, some cryptocurrencies only ask users to send coins using the provided addresses.

Memos are typically 9-digit values, but you can find others that feature alphabetic letters or alpha-numeric.

Which Crypto Assets Require Memo While Making an Exchange?

To use the right added security information, you need to know the crypto assets that require a particular additional ID. Here some of the digital currencies that require a Memo:

  • Hedera Hashgraph (HBAR)
  • EOS (EOS)
  • Stellar Lumens (XLM)
  • Binance Coin (BNB)
  • Cosmos (ATOM)

What Does Memo Look Like and Why it's So Important to Fill in this Section Correctly?

There are various types of memos, which means that these IDs do not look the same. The most common ones are:

  • Text: Offers you a way to include a brief message in your transaction. For example, you can add "Thank you."
  • ID: You add some unique pieces of information that help the recipient to identify the exact sender
  • Hash: This feature is used to reference another transaction
  • Return: When refunding, this Memo allows you to reference the relevant transaction

Given the difference in the purpose of memos, they look different. So, which type of Memo should I use? Refer to the crypto website to find out the decryption of the memos. Here are a few coins and their respective memo descriptions:

  • Stellar (XLM)-Alpha-numeric
  • EOS-Numeric Only
  • Cosmos (ATOM)- Numeric Only

If you are transacting with these currencies, you must use the right type of Memo correctly. Remember, exchanges require the information to enhance the safety of your assets. They typically use a few accounts to receive deposits. For that reason, they need the identifier to be able to distinguish the deposits of different users.

If exchanges had an account for each asset holder on their platform, the service costs and minimum balances would significantly increase. They have to use one or a few accounts and differentiate user's balances using the memos method. Of course, currently, there are a few that do not require IDs.

Memos also power the vital features of crypto exchanges and apps. So, when you use them rightly, you are assured of getting quality service promptly.

What Can Happen if You Don't Pay Attention to Fill in the Memo Correctly

If you fail to fill in the Memo correctly when purchasing coins, the exchange can unsuccessfully process the application. This means the fund will likely be irrevocably sent to an unknown user. So, before sending your coins, you should indicate the right Memo to ensure it gets promptly processed.

What is an Extra ID?

Extra ID is a generic term that refers to the additional information that helps exchanges identify and differentiate transactions on their platform. Some currencies such as KIN, EOS, and XRP have them.

Here are different types of Extra IDs:

  • Memos
  • Messages
  • Destination tags

Remember that these cryptocurrencies have different Extra IDs. For example, XRP has a destination tag, which is numeric (9-figure value). Stellar (XLM)'s Alpha-numeric.

When Does a User Need an Extra Identifier?

Users need additional identifiers whenever they send coins through centralized exchanges that use one or two addresses for all crypto trades. As we have seen in Memos' case, the extra security information helps determine the individual account where a specific transaction should be credited.

We can equate the cryptocurrency address where you send these coins with an apartment address. The extra ID is the door number that specifies where you live.

However, you do not need an Extra ID in some instances. For example, whenever you send your crypto assets to your privately controlled storage facility or device, you do not require it. For a wallet to qualify as privately owned, you must have full custody of its private and public keys. Examples of such wallets include:

  • Desktop: Wallets you have downloaded and installed on your devices
  • Hardware: Wallets that store your assets offline. They are also called cold wallets.

Some exchanges also give users the option to add Extra IDs or not.

Where to Find this Extra Identifier

Before making any transaction, you must find out whether the destination requires specifying identity information. Depending on the exchange, you can add the info under advanced options. If you have any difficulties, contact the service provider before sending the amount.

What if a User Forgot to Put an Extra Identifier in when it was Required

A user should never forget to put the Extra Identifier in whenever it is required. Whether it is a memo, message, destination tag, or any other type of ID, ensure you put it in if you are not using a privately owned wallet.

If you fail to do this, the exchange will:

  • Fail to process your transaction
  • Fail to identify the owner of the send digital assets

In other words, you will most likely lose your cryptos.

Wrap Up

Extra IDs such as Memos are unnecessary if you are receiving your coins from some established exchanges. It is also not essential when sending cryptos to your friends. However, whenever possible, you should add the information to ease the identification of payments.

Nonetheless, if your exchange or payment processor requires users to add Extra ID, you should put in the correct values. It is less costly for them to have a single deposit address for all users. If you ignore this, you may lose all your money since transactions confirmed on the blockchain are irreversible.