Definition ∞ Token approval risk refers to the security vulnerability associated with granting smart contracts permission to spend a user’s tokens on their behalf. If a user approves a malicious or compromised contract, that contract could potentially transfer an unlimited amount of the approved token from the user’s wallet without further authorization. This risk arises from the nature of token standards like ERC-20, which require explicit spending allowances. It represents a significant threat to user asset security.
Context ∞ Token approval risk is a frequent topic in discussions about wallet security and user best practices within the decentralized finance ecosystem. A key discussion involves educating users on how to manage and revoke token approvals to mitigate potential exploits. Future wallet interfaces and security tools will likely incorporate more granular control and clearer warnings regarding token spending permissions to enhance user protection.
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