The probably most reported pattern-matchingissue:
"Approve will not work for USDT onMainnet"
Today we will dissect this issue, explainthe rationale behind it and uncover the solution.
For the non-technical reader: Approving atoken means giving another account or contract permission to transfer up to acertain amount of tokens from your account, which is essential for interactingwith DeFi protocols. With most ERC-20 tokens, you can set this approval amountto whatever you like, and update it as needed.
Want to increase your approval? Justapprove a higher amount. It's that simple. Or at least, it should be.
USDT, however, breaks from this conventionin a weird way. If you have an existing approval and wish to change it, youcan't directly adjust it to a new amount.
Instead, you must first reset your approvalto zero before setting it to the new desired amount:
For instance, if you've approved a contractto spend 100 USDT on your behalf and only 10 USDT have been spent, you can'tdirectly reapprove to increase the limit back to 100 USDT. You must firstapprove 0 USDT, effectively revoking all approvals, and then approve the newamount.
This might seem like a minor inconvenienceat first glance, but it has significant implications for DeFi protocols andtheir users. Many DeFi applications are designed with the assumption that tokenapprovals can be freely adjusted. This assumption falls apart with USDT, andcan lead to stuck tokens, simply because of insufficient approvals and therevert of the approval call.
TheSolution: A Smart Approach to Approvals
Recognizing this challenge, a workaroundwas developed: the safeIncreaseAllowance method. This approach cleverlycombines the approval reset and the setting of a new approval into a singleoperation. First, it checks the current allowance and, if necessary, resets itto zero. Then, it immediately sets the allowance to the sum of the oldallowance (if any) and the desired increase.
This method streamlines the process, makingit compatible with USDT's peculiar approval requirements while maintaining aseamless user experience for interacting with DeFi protocols.
The USDT approval issue is a fascinatingexample of how even small deviations from standard practices can havewide-ranging effects on protocols and is a prime-example why security auditsare mandatory.
