🧵 ERC20 Approvals: How to NOT Lose Your Tokens

Approving tokens is essential in DeFi, but done wrong, it’s a disaster waiting to happen.

Here’s how approvals work, common traps, real hacks, and how to stay safe.

🔒 Bookmark this thread 👇

Buidlguidl is a curated group of Ethereum builders creating products, prototypes, and tutorials to enrich the web3 ecosystem. https://buidlguidl.com

2/9
💡 Why Approvals Matter
ERC20s power DeFi. But smart contracts can’t move your tokens unless you approve them first.

You’re basically saying: “Hey contract, here’s X tokens you can use.”

Used in swaps, lending, staking, etc.

3/9
⚙️ How It Works

- approve(spender, amount) = permission granted
- allowance(owner, spender) = how much contract can spend
- transferFrom(from, to, amount) = spender pulls tokens

4/9
🚨 Approval Risks to Watch

- Race Condition: Front-running
- Infinite Approval: Drained if exploited
- Phishing: Fake UIs steal approvals
- Forgotten Approvals: Still active
- UI Spoofing: Always double-check prompts

7/9
🧠 User Safety Tips
- Review allowances on http://revoke.cash
- Revoke unused or high-risk approvals
- Avoid “Unlimited” unless it’s really trusted
- Always verify spender address
- Read wallet prompts — not just txs but signatures too

6/9
🛠️ Dev Best Practices
- Approve(0) before changing allowance
- Avoid infinite approvals
- Use ERC20Permit or Permit2 for gasless, signed approvals
- Explore ERC-7674 (temporary, scoped allowances)
- Use audited libs like OpenZeppelin

5/9
💥 Real Hacks, Real Losses
- SHOPX: $7M
- bZx: $14M
- LiFi: $9.7M
- Ledger Connect Kit: phishing attack
- Permit2 misuse = countless drainers