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.
Glossar
Decentralized Exchanges
Access ⎊ These platforms offer permissionless entry to cryptocurrency and tokenized asset markets, democratizing capital deployment into novel financial structures.
Approve Function
Validation ⎊ Approve Function mechanisms within cryptocurrency derivatives represent a critical stage in smart contract execution, ensuring transaction authorization before state changes occur on-chain.
Gas Cost Influence
Network Congestion Effect ⎊ Gas Cost Influence refers to how network demand for block space directly impacts the price users must pay to include their transactions, a variable that introduces significant uncertainty into the execution cost of on-chain derivative settlements.