Crypto 101 Daily

As you move beyond a basic exchange and start connecting a wallet to apps and websites, a sneakier kind of scam appears: the approval (or “allowance”) scam. It doesn’t steal your password or seed phrase — instead it tricks you into granting permission for your funds to be taken. Here’s the plain-language explanation.

A little background: what an approval is

When you use decentralized apps (for example, to trade tokens), your wallet often has to grant the app “approval” to access a certain token — a normal, legitimate mechanism. The catch is that these approvals can be written to allow access to a lot, or even all, of a given token, and they can persist long after you’ve finished. That standing permission is what scammers abuse.

How the scam works

A scammer lures you to a fake or malicious website — often impersonating a real project, airdrop, or app — and prompts you to “connect” and approve a transaction. It may look routine, like claiming a reward or enabling a swap. But the approval you’re actually signing gives their contract permission to move your tokens. Once granted, they can drain the approved tokens from your wallet whenever they like — sometimes much later, so the theft seems to come out of nowhere.

Crucially, they never needed your seed phrase. You handed over access by approving something you didn’t fully understand. That’s what makes these scams so effective against people who think “I’d never give away my seed phrase.”

How to protect yourself

A few solid defences. Be very cautious about connecting your wallet to unfamiliar sites, and treat “claim your free tokens” prompts as likely traps. Before approving anything, read what the transaction is actually requesting — if a simple action asks for broad permission over your tokens, stop. Prefer interacting only with well-known, verified apps, and ideally use a separate wallet with only small amounts for experimenting, keeping your main holdings elsewhere. You can also periodically review and revoke old approvals using reputable tools, so stale permissions don’t linger.

The mindset that protects you

The key shift is realising that signing and approving transactions can be just as dangerous as revealing a password — because you might be authorising access to your funds. Slow down before approving anything, especially when there’s urgency or a too-good reward involved. If you don’t fully understand what you’re approving, the safest move is not to approve it. This is education, not financial advice.

Key takeaways

An approval (allowance) scam tricks you into granting a malicious contract permission to move your tokens — no seed phrase required. It hides behind routine-looking “connect wallet” and “claim reward” prompts on fake sites, and the theft can happen later. Protect yourself by avoiding unfamiliar sites, reading what you approve, sticking to verified apps, using a small separate wallet to experiment, and revoking old approvals. Treat approving as seriously as a password. This is education, not financial advice.

New here? This is an advanced cousin of the traps in how to spot a crypto scam and phishing. It’s also why a small, separate hot wallet is wise when exploring apps.