What is Token Approval?
In the ERC20 standard, no one can directly transfer tokens from your wallet unless you have Approved them in advance.
When a smart contract wants to move your tokens, the standard process looks like this:
- Approve: You permit a specific contract address to use up to a certain amount of your tokens.
- TransferFrom: The contract can only move tokens from your address within that approved limit. It is impossible to transfer more than what was authorized.
What is Unlimited Approval?
Unlimited approval means that during the Approve step, the limit you grant to a contract is not a specific value, but infinite. In other words, as long as you have tokens in your wallet, the contract can move them all.
Why is this risky?
Imagine you once used a DEX to buy tokens with USDT. For convenience, the developers set the approval amount to infinite, and you agreed without realizing it.
Even if you stop using that DEX, if the contract has a security vulnerability, is maliciously upgraded, or the team decides to rug pull, attackers don't need your private key or any further signature. They can directly drain the USDT from your wallet.
Summary & Best Practices
Developing these habits is crucial for your asset security:
- Regularly check the contract approvals in your wallet.
- Revoke approvals for projects you no longer use.
- Keep the approval list clean, especially for long-term storage wallets.