What is Token Approval?


Decentralized Applications (DApps) such as Decentralized Exchanges (DEXs) utilize smart contracts to execute transactions on the blockchain. DEXs like Uniswap or PancakeSwap use a certain smart contract that enables users to exchange their tokens for others. Initially, a user must grant permission to the smart contract to spend a certain amount of their tokens, known as an allowance. This serves as a security measure for token holders as it limits the spending capability of the smart contract on your behalf.

This function not only protects DApp developers but also allows the smart contract to operate properly. Through the token's approval, you empower the DApp's smart contract to verify the actual amount of the token you own. Token approvals are also employed in staking DApps where users lock their tokens to earn interest or other assets. 

Covered in this guide

  • Token Approval Examples

  • Token Approvals Enable Scams. 

Token Approval Examples

Swap on Built-In DEX. 

When doing a swap, you will be first required to approve the token in order to have it swapped to another asset. Once that is confirmed, you can then proceed with swapping your tokens.

Token Approval: When you want to swap one token for another, you first need to authorize the smart contract to access the tokens in your wallet. This is done by sending an approval transaction to a blockchain network like Ethereum or any other blockchain you’re performing the swap through. This transaction tells the smart contract, "You have my permission to use X amount of my tokens for this swap."

Token Swap: Once the approval transaction is confirmed, you can initiate the swap. The smart contract now has the necessary permissions to take the specified amount of the first token from your wallet, swap it for the second token, and deposit the new tokens back into your wallet. 

Staking DApps

Some DApps will require you to give permission for a token to be enabled for staking. 

Token Approvals Enable Scams. 

Token approvals are crucial for web3 functioning. But by allowing others permission to move your assets, you're opening yourself up to potential phishing attacks and scams. This is often the method employed by web3 scammers, as sending all approved tokens to themselves is their ultimate goal.

You might come across a tempting opportunity on social media platforms such as X,Telegram,Discord,... It could be a novel ERC-20 token, an unexpected NFT mint, or a token airdrop. While these offers might seem enticing, they're usually a trick set up by scammers.

Once you connect your wallet, you'll be asked to give your wallet's approval to interact with a specific smart contract. But remember, not all of these approval requests are alarming, many legit DeFi applications require them. That's where it gets confusing.

Scammers will urge you to give "unlimited" approval. In that case, their smart contract may transfer as many tokens as it desires from your wallet. So, unlike Uniswap, which only needs access to your USDC, scammers typically want access to every single token in your wallet.

The moment you give unlimited approval, scammers get the chance to withdraw any or all of the approved tokens from your wallet whenever they like. And just like that, your crypto wealth vanishes.

How can you safeguard yourself? Here are a few recommendations:

  • Stay Alert: Education is your most powerful weapon. Understand the scams' mechanisms and keep updated with the scammers' ever-evolving strategies.

  • Be Cautious: If an offer appears unrealistically lucrative, odds are it's not genuine. Always do your homework before proceeding.

  • Control Approvals: Set a reasonable limit when approving transactions, don't give unrestricted access unless you completely trust the other party and you have a solid reason to do so.

To benefit from the latest security measures, always keep your Trust Wallet up to date: trustwallet.com/download  

Did you find it helpful? Yes No

Send feedback
Sorry we couldn't be helpful. Help us improve this article with your feedback.