Penny Wise and Pound Foolish: Quantifying the Risk of Unlimited Approval of ERC20 Tokens on Ethereum

Abstract

The prosperity of decentralized finance motivates many investors to profit via trading their crypto assets on decentralized applications (DApps for short) of the Ethereum ecosystem. Apart from Ether (the native cryptocurrency of Ethereum), many ERC20 (a widely used token standard on Ethereum) tokens obtain vast market value in the ecosystem. Specifically, the approval mechanism is used to delegate the privilege of spending users’ tokens to DApps. By doing so, the DApps can transfer these tokens to arbitrary receivers on behalf of the users. To increase the usability, unlimited approval is commonly adopted by DApps to reduce the required interaction between them and their users. However, as shown in existing security incidents, this mechanism can be abused to steal users’ tokens.