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What are ERC20 Approve and ERC20 Allowance Methods?

ERC20 approve and allowance methods metaschool

Overview

The ERC20 approve and ERC20 allowance methods allow you to give a specific smart contract permission to use a certain amount of their tokens, without giving control of the entire token balance. It’s like giving a friend permission to withdraw money from your account up to a certain limit without giving them total control of your funds.

Letโ€™s look at each method with coding examples for better understanding.

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ERC20 approve method

  • This method empowers a token holder to authorize a designated smart contract to spend a predefined quantity of tokens from their balance.
  • The ERC20 approve method enables token holders to selectively allow spending for specific purposes or transactions, enhancing the flexibility of token usage.
  • Token holders retain the ability to revoke or modify approvals granted through the approve method, providing dynamic control over the smart contracts they authorize.
  • Function Signature: function approve(address spender, uint256 amount) external returns (bool);
  • Parameters: There are two parameters in ERC20 approve method
    • spender: The address of the permitted smart contract or any Ethereum address.
    • amount: The maximum token amount the spender is permitted to use on behalf of the token holder.
  • Return Value: A boolean signaling the success of the approval.
function grantPermission(address spender, uint256 amount) external {
  // Grant approval for the spender to utilize 'amount' tokens on behalf of the message sender
  require(token.approve(spender, amount), "Approval failed");
}

ERC20 allowance method

  • This method provides the remaining token count that the spender can expend on behalf of the token holder.
  • The ERC20 allowance method facilitates real-time monitoring of the remaining spending capacity, allowing both token holders and smart contracts to stay informed about the available allowance.
  • Token holders can strategically allocate allowances to different smart contracts based on their purposes, optimizing resource distribution within the ERC20 ecosystem.
  • Function Signature: function allowance(address owner, address spender) external view returns (uint256);
  • Parameters: There are two parameters in ERC20 allowance method
    • owner: The token holder’s address.
    • spender: The address of the authorized smart contract or any Ethereum address.
  • Return Value: The remaining allowance (token count) available for the spender.
function checkAllowance(address owner, address spender) external view returns (uint256) {
  // Retrieve the remaining allowance for 'spender' on behalf of 'owner'
  return token.allowance(owner, spender);
}

Conclusion

  • ERC20 allowance and approve methods allow users to set detailed permissions and ensure safe transactions in the ERC20 system.
  • Token holders can control how much smart contracts affect their tokens, providing a nuanced layer of control to decentralized applications. Knowing and using these methods is essential for effectively using ERC20.

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