Random DNA barcodes are a versatile tool for tracking cell lineages, with applications ranging from development to cancer to evolution. Here, we review and critically evaluate barcode designs as well as methods of barcode sequencing and initial processing of barcode data. We first demonstrate how various barcode design decisions affect data quality and propose a new design that balances all considerations that we are currently aware of. We then discuss various options for the preparation of barcode sequencing libraries, including inline indices and Unique Molecular Identifiers (UMIs). Finally, we test the performance of several established and new bioinformatic pipelines for the extraction of barcodes from raw sequencing reads and for error correction. We find that both alignment and regular expression-based approaches work well for barcode extraction, and that error-correction pipelines designed specifically for barcode data are superior to generic ones. Overall, this review will help researchers to approach their barcoding experiments in a deliberate and systematic way.Supplementary InformationThe online version contains supplementary material available at 10.1007/s00239-022-10083-z.