Ethereum has maintained its position among the top cryptocurrencies by pioneering smart contract functionality and enabling a vast ecosystem of decentralized applications (dApps). At the heart of seamless dApp interaction lies a critical mechanism: token approvals. These on-chain permissions allow users to grant smart contracts limited or unlimited access to their digital assets—streamlining transactions while introducing new security considerations.
Understanding how token approvals work, their evolution, and how to manage them safely is essential for every Ethereum user. This guide dives deep into the mechanics, risks, and best practices surrounding token approvals to help you maintain control over your crypto assets.
What Are Token Approvals?
Token approvals are on-chain authorizations that allow decentralized applications (dApps) to access and manage a specified amount of your tokens. Instead of signing every transaction individually, you can approve a smart contract once—enabling automated interactions such as trading, lending, or NFT sales.
For example, when using a DeFi platform like Aave or Uniswap, you must first approve the transfer of your ERC-20 tokens before depositing or swapping them. This approval tells the blockchain that the dApp’s smart contract is allowed to move your funds up to a defined limit.
👉 Learn how secure crypto interactions start with smart approval management.
Approvals are recorded permanently on the Ethereum blockchain and require a gas fee to execute. The level of access can be limited (e.g., 500 USDC) or unlimited, with the latter posing greater risk if the dApp is compromised.
Core Functions Behind ERC-20 Approvals
The ERC-20 token standard uses three key functions:
approve(address _spender, uint256 _value)– Grants permission to a contract to spend tokens.allowance(address _owner, address _spender)– Checks how many tokens a spender is allowed to use.transferFrom(address _from, address _to, uint256 _value)– Executes the actual transfer after approval.
Once approved, the dApp can call transferFrom whenever necessary—without requiring further wallet confirmation.
Why Do dApps Need Token Approvals?
By design, Ethereum wallets keep full control of assets. No external entity can move your tokens without explicit consent. Token approvals bridge this gap by giving dApps temporary authority to act on your behalf.
Common use cases include:
- Lending platforms: Approve tokens to supply liquidity or borrow assets.
- DEXs (Decentralized Exchanges): Enable automatic swaps without repeated confirmations.
- NFT marketplaces: Allow platforms like OpenSea to list or sell your NFTs.
Without token approvals, each interaction would require manual signature—slowing down user experience and increasing gas costs over time.
How Token Approvals Work: From ETH to WETH
While ERC-20 tokens support direct approvals, ETH—the native currency of Ethereum—does not. Since ETH isn’t an ERC-20 token, smart contracts cannot automatically transfer it via approve or transferFrom.
To solve this, users wrap ETH into Wrapped Ether (WETH), an ERC-20-compliant version that mirrors ETH 1:1. Once wrapped, WETH can be approved just like any other ERC-20 token.
Wrapping Process:
- Send ETH to the WETH smart contract.
- Receive an equal amount of WETH.
- Approve the WETH for use in dApps.
This conversion unlocks full compatibility with DeFi protocols and NFT platforms that rely on token approvals.
Evolution of Token Approval Standards
Over time, developers have introduced improvements to make approvals more efficient and secure.
ERC-20’s Original “Approve” Function
The initial method requires an on-chain transaction for every approval, resulting in gas fees and user friction. It also doesn’t support partial resets—if you exceed your approved limit, you must re-approve from zero or set a new higher cap.
Worse, unlimited approvals create long-term risks: if a contract is exploited later, attackers can drain all approved tokens.
ERC-2612: Permit Signatures
ERC-2612 introduced off-chain permit signatures, allowing users to sign approvals without an immediate blockchain transaction. The dApp collects the signature and submits it later when needed.
Benefits:
- No upfront gas cost.
- Supports expiration times and spending caps.
- Reduces transaction count.
However, adoption remains limited—only ERC-20 tokens that implement ERC-2612 can use this feature.
Permit2: Universal Gasless Approvals
Developed by Uniswap Labs, Permit2 consolidates multiple approval mechanisms into one contract. It supports:
- Gasless approvals across all tokens—even those not ERC-2612-compliant.
- Batch revocation and approval.
- Built-in expiration (no more lingering permissions).
Permit2 represents a major leap forward in usability and security, reducing both cost and risk for users.
👉 Discover how next-gen approval systems enhance security and efficiency.
Risks of Token Approvals
Despite their utility, token approvals carry real dangers:
1. Malicious Smart Contracts
Scammers often deploy fake dApps that request excessive permissions. If you approve a malicious contract via phishing or typo-squatting, it can drain your wallet instantly.
2. Exploited or Compromised Contracts
Even legitimate dApps may have vulnerabilities. If a contract is hacked after you’ve approved it, your funds remain at risk—even if you no longer use the platform.
3. Accidental Approvals
Mistakenly connecting to the wrong site or approving an unintended contract can expose your assets. Always verify URLs and contract addresses on Etherscan.
4. Unlimited Access Abuse
Unlimited approvals mean a contract can withdraw your entire balance at any time. While convenient, this should only be granted to highly trusted platforms—and ideally revoked afterward.
When Should You Revoke Token Approvals?
Revocation is just as important as granting access. Consider revoking approvals in these scenarios:
You No Longer Use the dApp
Inactive connections increase exposure. Revoke access to unused platforms to minimize attack surface.
A Security Breach Is Reported
If a dApp announces a hack or exploit (e.g., NFT Trader’s $3M theft), revoke immediately—even if you’re unsure whether you’re affected.
You Made an Accidental Approval
Act quickly if you approve the wrong contract. Use tools like Revoke.cash to cancel access before damage occurs.
After Major Network-Wide Incidents
Following large-scale exploits (e.g., bridge hacks), proactively revoke approvals across multiple dApps to prevent cascading risks.
How to Approve Tokens Safely
Follow these best practices to protect your assets:
Only Approve Trusted Platforms
Stick to well-known dApps with audited contracts and strong reputations. Double-check URLs and contract addresses before signing.
Limit Approval Amounts
Whenever possible, approve only the exact amount needed—not unlimited access.
Use Dedicated Wallets
Segregate your holdings:
- Vault wallet: Stores long-term assets; never connects to dApps.
- Trading wallet: Used for active DeFi/NFT activity.
- Burner wallet: For testing new or untrusted platforms.
This way, even if one account is compromised, your core assets remain safe.
Regularly Audit and Revoke Permissions
Use tools like:
They let you view active approvals and revoke them in bulk—some even estimate potential gas savings.
👉 Stay ahead of threats with proactive token permission management.
Does Revoking Approvals Cost Gas?
Yes—revoking is an on-chain transaction, so it incurs a gas fee. However, newer solutions like Permit2 allow batch revocations and gasless operations under certain conditions, making cleanup faster and cheaper.
Frequently Asked Questions (FAQ)
Q: Can I lose my crypto just by approving a token?
A: Yes—if you approve a malicious or compromised contract, it can transfer your funds without further permission. Always verify the dApp’s legitimacy first.
Q: Does unlimited approval give access to all my tokens?
A: No—only the specific token or NFT collection you approved. For example, unlimited WETH approval doesn’t affect your USDC or NFTs from other collections.
Q: Can hardware wallets protect me from bad approvals?
A: Not fully. While they secure private keys, they cannot stop you from approving malicious contracts. User awareness is still critical.
Q: How do I check my current token approvals?
A: Use Revoke.cash or Etherscan’s Token Approval Checker—enter your wallet address to see all active permissions.
Q: Is there a way to set expiration dates for approvals?
A: Native ERC-20 doesn’t support this, but newer standards like ERC-2612 and Permit2 do allow time-limited approvals.
Q: Should I revoke every approval after each transaction?
A: Not necessarily—but regularly audit and remove unused ones. Balance convenience with security based on risk level.
Final Thoughts
Token approvals empower users with self-sovereignty in Web3—allowing seamless interaction with decentralized finance, NFTs, and more. But with great power comes great responsibility. Mismanaged approvals are among the top causes of fund loss in crypto.
By understanding how approvals work, leveraging modern standards like Permit2, limiting permissions, and regularly revoking unused access, you can enjoy the benefits of DeFi while minimizing risk. Combine these habits with asset segregation and vigilant research, and you’ll build a resilient defense against today’s evolving threats.
Stay informed, stay cautious, and take control of your digital sovereignty.