What is a token allowance

A token allowance is set to authorize a DApp (Decentralized Application) or DEX (Decentralized Exchange) to manage token on the user’s behalf. After getting the permission, the DApp and DEX can execute some operations for you, with this token.

Why we need to do it

Both ERC20 token holders and DApp developers benefit from the approval protocol. Because DApps (decentralized applications) use smart contracts to execute transactions, you must give permission for the smart contract to transfer up to a certain amount of your token (called an allowance). The smart contract will only ever be able to transfer the amount of tokens you approve. This is done, in part, as a security measure for ERC20 token holders.

For example,

  • Users want to deposit imBTC to Lendf for interest
  • Users need to approve the permissions of imBTC to Lendf, then the smart contract of Lendf to execute transactions to complete the loan process

Pay attention to the following two points when setting allowances:

  • Confirm the allowance category

The user needs to confirm what kind of permissions the DApp is requesting before     deciding whether to allow it. If a DApp maliciously applies for permission, you must reject.

  • Confirm allowance amount

When DApp and DEX apply for token allowance, users need to know the allowance information, sometimes, you can lower the allowance amount to reduce the risk.

How to get the full allowance list

Search the allowance management DApp on the imToken Browse page, find the Token Allowance Checker or Approved Zone, you can use these two DApps to manage token allowance and reduce risk.