The concept of token allowance can be quite confusing for beginners in the crypto space. In this article we will be exploring token allowance, why you need a token allowance, benefits of token allowances and how to create a token allowance with Zerion.
What is Token allowance?
A token allowance refers to the permission granted by a token holder to another party or application to spend a specific amount of tokens on their behalf.
It is facilitated by the approval of smart contracts within the blockchain network which is done by signing a transaction that authorizes the smart contract to spend a certain amount of tokens on the user's behalf.
Why do i need a token allowance?
- To use a DEX or other decentralized application (dApp).
This is because the DEX is a smart contract, and it needs your permission to spend your tokens.
DEX, Decentralized exchange is a type of exchange that operates on a Blockchain without the need for a central authority. Some include uniswap, sushi swap etc.
To lend your tokens.
To stake your tokens.
To vote on a proposal.
To make a payment.
To participate in a token sale or airdrop.
It is important to review the documentation for the application or platform you are using to understand why you need to set up a token allowance.
What is Zerion?
Zerion is a decentralized finance management platform that allows users to manage their crypto assets from one place.
It supports over 60 DeFi protocols and 500+ tokens, allowing users to invest, stake, lend, borrow and trade directly from the dashboard.
It has a minimalistic and easy to use interface that is designed for both beginners and experienced crypto users.
Zerion's main features are; token management, staking, and liquidity pool management. It also provides users with data on prices, volume, and other metrics. The platform is noncustodial, meaning that users maintain control of their assets at all times.
Steps to create a token allowance with Zerion
Prerequisites
A basic understanding of cryptocurrency and token allowances.
A Zerion account.
A crypto wallet that is compatible with Zerion, such as MetaMask, WalletConnect, or Coinbase Wallet.
A supported ERC-20 token
Some ETH in your wallet to cover gas fees.
Step 1:
Click here to access the Zerion website
Download the Zerion app or chrome extension
Step 2:
Login to your Zerion account
Click on the "Connect Wallet" button and connect your Ethereum
Zerion supports wallets like MetaMask and WalletConnect or Coinbase.
Step 3:
Choose the specific token which you want to set up an allowance for.
N/B: you should have some Ethereum in your wallet.
Step 4:
Click 'Edit' in the 'Spending Token' field
Enter your desired token spend limit
Clicking 'Confirm' to set the limit
Step 5:
After choosing the desired allowance amount approve the transaction using your wallet
confirm the transaction through your wallet interface.
Step 6:
After setting the allowance
Review and confirm to ensure the details are correct
To take back control of your wallet and revoke all transactions Click here
Benefits of using custom token allowances in Zerion
It helps you guard your funds by limiting the amount dapps can spend
Reduce risks from scams and compromised smart contracts
Custom token allowances make it easy to manage allowances directly within the wallet
It provides notifications for approval and revocation of allowances
Conclusion
Setting custom token allowances in Zerion gives you more control over how your tokens can be used. It allows you to balance convenience with security based on your specific needs.