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Using tags you can categorize the servers by grouping a server under a single tag or you can also enter multiple tags separated by 'Space' for each server. Also, note that if you do not provide any tag then by default the server will be categorized under 'Not Tagged'.
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Using tags, it is easy to search for a group of servers at once, simply enter the tag name in the server selector with # (ex: #test) and all the tags with the entered keyword are listed and you can further select the desired tag to select servers tagged under it.