For any decentralized exchange (DEX) swap, a critical preparatory step is token approval. This process authorizes a DEX's smart contract to access and spend a specific amount of tokens from your wallet on your behalf. This guide explains the fundamentals of this transaction and how to construct an approval request.
What Is a Token Approval?
Token approval is a mandatory security feature for ERC-20 tokens on Ethereum and other EVM-compatible blockchains. Before you can swap Token A for Token B on a DEX, you must first grant the DEX's router contract permission to withdraw the exact amount of Token A you intend to trade from your wallet.
This mechanism prevents smart contracts from arbitrarily accessing user funds without explicit consent. The approval is a one-time transaction for each token and spender contract, though many wallets and DEXs now offer infinite approvals for user convenience.
Core Components of an Approval Request
Constructing a proper approval transaction requires several key pieces of data. These ensure the transaction is executed on the correct blockchain for the right token and amount.
Required Request Parameters
To build an approval, your application must gather the following information:
- Chain ID: A unique identifier for the blockchain network you are using (e.g.,
1for Ethereum Mainnet,56for BNB Chain). - Token Contract Address: The official smart contract address of the token you wish to approve for trading.
- Approve Amount: The precise amount of tokens you are approving, factoring in the token's decimal places.
Understanding the Response Data
Once you request an approval transaction, you will receive the necessary data to broadcast it to the network. This typically includes:
- Call Data: The encoded information that forms the core of the transaction, instructing the token contract to grant approval.
- DEX Contract Address: The address of the DEX router that needs spending permission.
- Gas Limit: The maximum amount of computational effort the transaction is allowed to consume.
- Gas Price: The amount of wei you are willing to pay per unit of gas for the transaction.
How to Handle Approval Transactions
After receiving the approval data, your wallet or application must sign and broadcast the transaction to the blockchain. This requires a secure connection to a node, either by running your own or using a trusted provider.
Once the approval transaction is confirmed, the DEX aggregator has the necessary permissions. You can then proceed to build and execute the actual swap transaction. For a streamlined experience, many platforms bundle these steps. 👉 Explore more strategies for efficient trading
Frequently Asked Questions
Why do I need to approve tokens before swapping?
Approvals are a fundamental security feature of the ERC-20 standard. They ensure that a smart contract cannot move your tokens without your direct permission, giving you complete control over your assets.
What is the difference between a limited and an infinite approval?
A limited approval grants permission for a specific token amount. An infinite approval sets the allowed amount to the maximum possible value, eliminating the need to approve that token for the same contract again. While convenient, infinite approvals carry a slight security risk if the spender contract is ever compromised.
How can I check or revoke existing token approvals?
You can use blockchain explorers like Etherscan or dedicated approval management tools. These platforms connect to your wallet and display all contracts with spending permissions, allowing you to revoke them if desired.
What happens if my approval transaction fails?
Failed approvals are often due to insufficient gas or an incorrectly set gas limit. You will lose the gas fee for the failed attempt but your tokens will be unaffected. You simply need to retry the transaction with adjusted gas parameters.
Is one approval enough for all trades?
An approval is specific to both the token and the DEX router contract. You need a separate approval for each unique token and for each different DEX contract you interact with.
Can I use the same approval on different blockchain networks?
No. Approvals are network-specific. An approval granted on Ethereum Mainnet is only valid there; you must grant a separate approval for the same token on another network like Polygon or Arbitrum.