Token Approvals
Token approval is a process that allows users to grant third parties access to specified tokens in their wallet while interacting with DeFi apps.
Token approvals are a process that allows blockchain users to grant third-party access to a specific token, in a specific amount, for a specific duration. The process involves the user approving a smart contract address to interact with a specific token contract.
Token approvals are necessary for users to take advantage of certain services such as decentralized exchanges, yield farming, and DeFi applications. By granting third-party contracts access to your tokens, you can take part in these services without having to constantly move tokens around.
However, it is important to note that token approvals are even more important when it comes to the safety of your funds. Without token approvals, users would not be able to do anything to protect themselves from malicious contracts that could potentially steal their tokens.
Key Takeaways
- Token approval is a process that allows users to grant third parties access to specified tokens in their wallets.
- Token approvals are necessary for users to take advantage of certain services such as decentralized exchanges, yield farming, and DeFi apps.
- Revoking token approvals can be done at any time.
- It is important to take actions to safeguard your wallet against token allowance vulnerabilities.
How Token Approvals Work
The process of approving tokens is relatively simple. The user must first find the token contract address of the specific token they want to approve. Then, they must find the specific address of the third-party contract they want to authorize. After that, they must use the “approve” function of the token contract to grant access to the third-party contract.
Once the user has approved the third-party contract, they can then take advantage of the services offered by that contract. For example, if the user has approved a decentralized exchange, they can now trade the token without having to constantly move it around.
It is important to note that once the user has authorized a third-party contract, they are responsible for monitoring it. If the user notices any suspicious activity, they should immediately revoke the token approval to protect their funds.
Revoking Token Approvals
Once a user has authorized a third party contract, they may want to revoke the token approval for various reasons. To do this, you can use CoinBrain Wallet Approvals Checker and Revoker. It displays all approvals connected to your wallet and you’re able to easily revoke them. By revoking the token approval, you ensure that the third-party contract will no longer be able to interact with the token.
It is important to note that token approvals can be revoked at any time and the user does not need to wait for any specific duration to do so. Therefore, users should always be vigilant and keep an eye out for any suspicious activity.
We recommend revoking approvals after finishing any transaction which required approval. The reason is, that even trustworthy third parties can face data breaches or the attack of hackers. In that case, your funds might be at risk.
Unlimited Token Approvals
Unlimited token approvals are requests made by decentralized applications (dapps) that are requesting access to an unlimited amount of tokens. This is opposed to a limited or specific amount of tokens. In many cases, the dapp is requesting access to all of the tokens a user holds in their wallet. This is done to minimize the need for the user to re-approve access to the token every time they want to use it on the dapp.
Unfortunately, unlimited token approvals can be risky for web3 users because malicious sites often use this method to steal tokens. Even if a user is following all of the recommended security tips, such as keeping their recovery phrase offline and never sharing it, they are still vulnerable to attack.
Steps to Safeguard Your Wallet
While the token allowance permission is an important part of the DeFi space, it is important to understand the risks associated with it and take steps to protect your wallet. To ensure the security of your tokens, here are four steps you can take to help safeguard your wallet against token allowance vulnerabilities.
1. Review Existing Allowances on Your Wallet
Platforms like revoke.cash and approved.zone or coinbrain.com can be used to identify token allowances associated with an address as well as options to revoke or lower such allowances. It’s important to regularly review your existing allowances and revoke any that are no longer required.
2. Set Custom Spending Limits on MetaMask
When approving spend limits for new tokens, instead of selecting unlimited, opt to set a custom limit on your MetaMask wallet. This will help to ensure that only the intended amount of tokens are spent and prevent malicious actors from draining your funds.
3. Use Reputable Projects
When interacting with DeFi projects, it’s important to ensure that they are reputable and have a track record of success. Do your own research and due diligence to ensure that the project is legitimate and has a good reputation in the community.
4. Do not rush into decisions
Finally, users should always remain vigilant and not rush into decisions. If a dapp is offering something that sounds too good to be true, it is important to take the time to research the dapp and verify its legitimacy before making a decision.
FAQs
What are the risks of token approvals?
Setting approval for tokens allows whoever you approved to spend them like they were their own. If someone were to gain access to the address where you approved your tokens, they could spend the approved amount without needing any additional validation. This process could be risky as it leaves you vulnerable to potential hackers.
Why do I need to give permission to a smart contract before I can trade my tokens?
In order to trade your tokens, you must first give permission to a smart contract. This is an industry standard across all decentralized exchanges and is designed to protect your wallet from being accessed without your authorization.
What is the result of revoking a token allowance?
Revoking a token allowance on Ethereum will prevent a token from being bought, sold, or transferred using the given third party service without first approving the allowance. This action requires a gas fee to be paid.
Are token approvals free?
No, token approvals require transaction fees to be paid to miners in order for the approval to be registered on the blockchain. Similarly, revoking the approval costs a certain amount of gas fee.
Is it safe to confirm unlimited token approval?
Yes, it is safe to confirm an unlimited token approval of a service which you trust. It is important to note, however, that the token contract should be carefully reviewed before confirming the approval. At the end of the transaction, we still recommend revoking the approvals.
