Understanding Stellar memos

When you send lumens with your XLMwallet, you’ll see a field that says “Memo” with a drop-down list of types. Today we’ll explain when you should use them and which type to choose for different situations.

Memos are another powerful tool offered by Stellar, making it much more attractive than most other cryptocurrencies. Memos are little messages you can attach to your transactions. They allow you to communicate with your recipients right inside the transaction, without having to write messages or emails. In some cases memos are just useful, in others they are absolutely necessary.

Depositing XLM in an exchange

If you are sending lumens from XLMwallet to a crypto exchange, you’ll probably need to include a memo. Exchanges can’t have personal accounts for all their users — it would be a nightmare and very costly. Instead they have one huge account — like a mega-wallet with millions of dollars’ worth of lumens in it. How does the exchange know whose money is whose? Usually from memos. The data base can find all the transactions sent by the same user by their memo ID and calculate your balance. Of course, you need to double-check your exchange’s user guide or terms of service.

The correct type of memo to use for this purpose is the Memo ID. This ID will never change. Remember: if you forget to include a Memo ID when you send money to an exchange, you can lose your XML forever.

Sending money to friends or e-commerce sites

Your recipients — be it individuals, online stores or service providers — can get dozens of incoming transactions every week. How are they supposed to know which one came from you? Of course, you can send them an email or a Telegram message saying, “Hey, I’ve just sent you 100 XLM, check your wallet), but it’s not efficient at all. It’s much better to include your message together with the transaction in XLMwallet.

The right type of memo to use is Memo Text. If you are sending money to a friend, you can write something like “It’s me, Jim”. If you are paying in an online store, it’s wiser to write your email address instead.

Making refunds

Let’s say someone sent you lumens for a service, but you can’t provide it. If you are an honest person, you’ll return them the money. This is what Memo Return type is for. In it, you should insert the transaction ID of the payment you are returning. (To check the transaction ID, go to the Transaction History section in your XLMwallet).

Online stores can also use this memo type to make a refund — when they have a refund policy for payments in crypto. Actually, with Bitcoin and Ethereum refunds are very hard, and most companies don’t bother with them. Crypto transactions are supposed to be irreversible, after all. But if digital currencies are to make an impact on the real economy, they must have a refund mechanism built into them. And Stellar is far ahead of its competition in this sense.

Promoting a project

This is quite controversial, but you should know that this marketing tool exists. You could send very tiny XLM payments to a large number of people and include some advertising text as your Memo Text. Something like “Project X — new awesome Stellar dApp”. You’ll only spend a few dollars and reach out to thousands of people. Many Stellar users don’t like this kind of messages — but at the same time, they receive a small amount of money with each, so there is some benefit to everybody in this.

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