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How Does the Approve Function Enable Decentralized Exchanges (DEXs)?

It grants a DEX contract permission to spend a user's tokens via transferFrom , enabling non-custodial trading without direct asset transfer.
Greeks.Live16.11.25

How Does the Approve Function Enable Decentralized Exchanges (DEXs)?

The approve function in ERC-20 allows a token holder to grant a third-party smart contract, like a DEX, permission to spend a specified amount of their tokens. When a user wants to trade, they first approve the DEX contract.

The DEX's trading function then calls transferFrom , moving the tokens from the user to the exchange's liquidity pool or another user. This is essential for non-custodial trading.

How Does a Decentralized Exchange (DEX) Utilize Smart Contracts for Derivatives Trading?
Why Was the Approve() and Transferfrom() Pattern Chosen for the ERC-20 Standard?
What Is the Role of the ERC-20 Standard’s Approve() Function in Setting a Token Allowance?
What Are the Key Functions Defined in the ERC-20 Standard?

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