What is Token Transfer Approval, and What Risk Does it Involve?

What is ERC20 token approval?

Most DApps on ETH involve contract operations, so the approval operations, that is, the user is actually allowing the contract to have access to a certain amount of tokens in the address.

For example,

Account A has 10,000 tokens. Account B has no token, and so does account C.

So how does account A delegate B to send 100 tokens to account C?

Firstly, accounts A and B will have to establish a delegating relationship. The user needs to login account A and run approve(b,100) to the result: _allowed[A][B]=100token

Then, account B needs to be logged in and run transferFrom(A,C,100). Account B is the delegated sender, from which account the gas is deducted. So the amount of tokens sent must below the _allowed[A][B] level.

In conclusion, this is how a transfer is made from A to C through B.

The risks may be involved in the process

In the process, if the user approves the transfer to a malicious contract, it means that the contract is able to use the user’s tokens to make collateral or do other malicious things.

DeFi on ETH is already widely recognized by the public, with well-known projects like Uniswap, Curve, and Balancer. These tools have easiness of use and powerful functions, which are also easy to list tokens. However, these features may make the tools a hotbed for evildoers. Hence, whenever we conduct ERC20 token swap (especially some new tokens), the process involves a certain degree of risk. The new version of TP wallet comes in to place at the right time — the newly added [Action] and [Approved Amount] are evidently important. As mentioned above, to approve a transfer is like to sign a contract. In TP Wallet, if the maximum amount of the tokens that can be used in the contract is X, and when the required amount is larger than X, second approval permission will be triggered.