Decentralized Finance (DeFi) has taken the Ethereum ecosystem by storm, revolutionizing how users interact with financial services through lending, staking, and trading ERC20 tokens. However, one of the foundational mechanisms enabling these interactions—ERC20 token approvals—also introduces significant security risks when misused. Among these, infinite token approvals have become a growing concern for both users and developers.
This article explores what infinite token approvals are, why they’re dangerous, real-world examples of exploitation, and practical steps users and developers can take to minimize risk—all while maintaining smooth DeFi functionality.
Understanding ERC20 Token Approvals
To interact with most DeFi protocols like Uniswap, Aave, or Yearn Finance, you must first grant permission for a smart contract to access your ERC20 tokens. This process is known as an ERC20 approval.
Unlike ETH—the native currency of Ethereum—ERC20 tokens are themselves smart contracts. You can't simply send them to another contract and expect actions to be executed automatically. Instead, the transferFrom() function allows approved contracts to move tokens on your behalf.
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For example, when depositing DAI into Aave to earn interest:
- You approve the Aave smart contract to spend a certain amount of DAI from your wallet.
- You call the deposit function in Aave’s contract.
- The contract uses
transferFrom()to pull the approved amount and issues you aDAI (Aave’s interest-bearing token).
Without this approval mechanism, DeFi platforms wouldn’t function. But the way approvals are implemented—especially infinite approvals—can expose users to unnecessary risk.
The Danger of Infinite Approvals
Many dApps request unlimited spending permission instead of a fixed amount. While this improves user experience—eliminating the need for repeated approvals—it opens the door to serious vulnerabilities.
Once you grant infinite approval to a malicious or compromised contract, that contract can withdraw all of your token balance at any time, not just the amount you initially intended to use.
Paul Berg, developer of Sablier, highlighted this issue during a talk at Devcon 5. While building his protocol, he discovered a critical bug: even though only $100 worth of DAI were deposited, **$10,000 worth of DAI across test wallets was at risk** due to prior infinite approvals.
This scenario illustrates a crucial point: your entire token balance becomes vulnerable once unlimited access is granted, regardless of how much you actually use in a protocol.
Real-World Exploits: From Bugs to Scams
While the risks were once considered theoretical, recent events prove otherwise.
The Bancor Vulnerability
In one notable incident, Bancor suffered from a bug where a function meant to handle transferFrom() was mistakenly set to public instead of private. This allowed attackers to invoke the function directly and drain user funds. Fortunately, Bancor executed a white-hat intervention—freezing funds and returning them before major losses occurred.
Fraudulent DeFi Projects
During the summer 2020 "DeFi summer," numerous forked projects with food-themed names emerged—some legitimate, many fraudulent. Even users who deposited small amounts fell victim because they had granted infinite approvals.
Take UniCats, for instance. Users deposited UNI tokens to earn MEOW rewards via liquidity mining. However, the app required infinite approval. Had the project been exploited, attackers could have drained not only staked UNI but also all UNI tokens in connected wallets.
The Degen Money Attack
Another alarming case involved Degen Money, which didn’t deploy its own smart contract. Instead, it tricked users into signing two approval transactions—one legitimate, one pointing to a malicious address. Due to lack of scrutiny over contract addresses, many users unknowingly gave full access to their token balances.
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Do Hardware Wallets Protect Against This?
Hardware wallets like Ledger or Trezor offer strong protection against private key theft, as keys never leave the device. However, they cannot prevent abuse of ERC20 approvals.
When you sign an approval transaction—even on a hardware wallet—you’re authorizing a smart contract to spend your tokens. The hardware wallet confirms your intent but doesn’t analyze whether the approval amount is safe or excessive.
So while using a hardware wallet remains a best practice for overall security, it does not mitigate risks from excessive token approvals or smart contract exploits.
What Can Developers Do?
Improving approval safety starts with better design choices in dApp development.
1. Use Exact Amount Approvals (Pay-As-You-Go)
Instead of requesting unlimited access, dApps can ask users to approve only the exact amount they intend to use. This is far safer but comes with trade-offs:
- Users must sign a new approval every time they want to deposit more.
- Increased gas costs during high network congestion.
Despite usability challenges, this model maximizes security and should be encouraged for high-value transactions.
2. Allow Tiered Approval Options
Some platforms like 1inch.exchange and Curve.fi let users choose between:
- Approving only the current transaction amount.
- Setting a higher limit for future convenience.
This balances usability and control, empowering informed decisions.
3. Adopt EIP-2612 for Gasless Approvals
The EIP-2612 standard enables users to authorize spending via off-chain signatures—eliminating the need for costly on-chain approval transactions. While promising, adoption remains limited due to lack of tooling and ecosystem support.
Wider implementation could reduce friction while encouraging safer, per-transaction approvals.
What Should Users Do?
You can’t avoid approvals entirely—but you can manage them responsibly.
Avoid Infinite Approvals When Possible
Always check if a dApp allows setting a specific approval amount. If so, use it—especially for untrusted or experimental projects.
Regularly Audit Your Approvals
Over time, you accumulate dozens of active approvals across various dApps. Many may be outdated or forgotten.
Use tools like:
- revoke.cash
- approved.zone
These let you view and revoke unnecessary permissions with ease.
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Follow These Best Practices:
- Treat infinite approvals like long-term commitments—only grant them to well-audited, trusted protocols.
- Review your approvals monthly.
- Revoke access for services you no longer use.
- Double-check contract addresses before signing any transaction.
Frequently Asked Questions (FAQ)
Q: What is an ERC20 token approval?
A: It’s a permission you grant to a smart contract allowing it to spend a specified amount of your ERC20 tokens on your behalf using the transferFrom() function.
Q: Why do dApps ask for infinite approvals?
A: For convenience. It avoids requiring repeated approvals for each transaction, improving user experience—but at the cost of increased security risk.
Q: Can I revoke an approval after granting it?
A: Yes. You can revoke or reduce any ERC20 approval at any time using tools like revoke.cash or directly through your wallet interface.
Q: Does revoking an approval cost gas?
A: Yes. Revocation requires an on-chain transaction, so you’ll pay network fees similar to any other Ethereum transaction.
Q: Are hardware wallets immune to approval-based attacks?
A: No. Hardware wallets protect private keys but cannot stop you from approving malicious spending limits. The risk lies in transaction logic, not key security.
Q: Is there a way to approve tokens without paying gas?
A: Yes—through standards like EIP-2612 that allow off-chain signed authorizations. However, support is still limited across major tokens and platforms.
By understanding the mechanics and risks behind infinite token approvals, both users and developers can make smarter decisions in the DeFi space. Security doesn’t have to come at the expense of usability—but awareness and proactive management are essential.
Stay vigilant, audit your permissions regularly, and prioritize safety over convenience when dealing with high-value assets in decentralized applications.