What are Token Approvals?

Token approvals allow users to grant permissions to smart contracts to spend a specified amount of their tokens on their behalf. This is a core feature of ERC20 and similar token standards. This mechanism enables decentralized applications (dApps) to interact with tokens securely and efficiently, allowing for functionalities like trading, lending, and staking.

tip

Token Approvals are required in order to do on-chain swaps.

Why is it Important?

When approving tokens, users should be cautious about which contracts they grant permissions to. Malicious contracts can potentially drain the user's funds if given unrestricted access. Understanding the security implications helps users protect their assets by limiting approvals to trusted contracts and regularly reviewing and revoking unnecessary permissions.

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You can use third-party tools like Ethereum Token Approval to revoke ERC20 token approvals.

Approval Amounts?

Users can specify the exact amount of tokens they wish to approve for a contract to spend. This can be a fixed amount or an unlimited allowance. Users can manage their token allowances by increasing, decreasing, or revoking approvals through their wallet interfaces or dApps.

In the example below, only a specific amount of 50 USDT was approved for the swap rather than the entire balance of 131 USDT.