Crypto glossary
Token approval
A token approval is a permission a wallet grants a smart contract to spend a set amount of a specific token on its behalf, often requested before a DeFi trade.
ERC-20 tokens cannot be pulled by a contract unless the owner first approves it. When a user trades on a DEX or deposits into a lending protocol for the first time, the wallet asks for an approval transaction that sets an allowance: the maximum amount that contract may move. NFT standards have a similar function that can cover a whole collection.
To save fees, many apps request an unlimited approval, which stays active until revoked. That is convenient but risky: if the contract is later exploited or the approval was granted to a malicious contract, the tokens can be taken at any time without another signature. Off-chain permit signatures work the same way and are a favourite tool of wallet drainers, because they cost no gas and look harmless.
Approving only the amount needed, reading what is being signed and periodically revoking old approvals with a block explorer's approval checker or the wallet's own tools keep exposure low.
Example
To swap 500 USDC on a DEX, a user first approves the router; if the app requests unlimited spending instead of 500 USDC, the router can move the user's full USDC balance until the approval is revoked.
