What is a Monero Payment ID?

Payment IDs are used when a single address is receiving transactions from multiple users, like at an exchange. They are useful because, unlike Bitcoin, it's resource intensive to create and maintain a unique Monero wallet for each user. They allow a company to serve many users while only monitoring a single address.

While exchanges may require Payment IDs, they are optional and do not need to be included when sending a transaction from user to user.