Technical Definition

Approval / Allowance

An ERC-20 approval sets an allowance that lets a specified address or smart contract spend up to a defined amount of a user's tokens.

By Crypto University Editorial
RevokeSmart contractSignature

✦ Key Insight

Approvals are necessary for many swaps and DeFi actions, but broad or forgotten allowances can create risk if the approved contract is malicious or later compromised. Users should understand what asset, spender, and amount they are authorizing.

✕ Common Misconceptions

An approval is not the same as a one-time transfer. Unlimited approvals may remain active after you finish using an app. Always verify the spender address and do not approve unexpected prompts.

Detailed Explanation

Many DeFi apps cannot move an ERC-20 token from your wallet until you authorize a spender. The approval transaction records how much that spender is allowed to transfer on your behalf. The remaining permission is called the allowance.

In Practice

“A user approves a DEX router to spend up to 500 USDC. The router can transfer the necessary USDC for the user's swap, subject to the token contract's allowance rules.”

Dig Deeper

Smart Contract

A smart contract is blockchain-deployed code that can hold state and execute predefined rules when called.

Wallet Address

The public string of characters others send crypto to, derived from your public key.

Token

An asset created by a smart contract on an existing blockchain rather than being that blockchain's native currency.

Revoke

To revoke a token approval is to remove or reduce a previously granted spending allowance for a smart contract or address.

Signature

A cryptographic signature proves that the holder of a private key authorized specific data without revealing the private key itself.