Understanding the Permitted Transfer Rule in Ethereum
When you deploy a non-feeable ERC-20 token contract on the Ethereum blockchain and grant it permission to use your digital wallet's funds for specific purposes, including transferring a certain amount of tokens, there are rules that must be followed. In this article, we'll explore what happens when these conditions are met and when transactions involving permitted transfers may occur.
The Permit Transaction
To initiate a permitted transfer, the following steps must be taken:
Granting permission: You grant your contract permission to use your wallet's funds for a specific purpose.
Creating a permit: Your contract creates a "permit" that specifies the amount of tokens and the recipients who are authorized to spend these tokens.
Transferring funds
: The recipient of the permitted transfer is asked to sign the permit, which serves as proof that they have received the approved tokens.
Moving Tokens Before Transfer
Now, let's assume you move your 20 ERC-20 tokens from one wallet to another before transferring them using transferFrom. Here's what could happen:
Transaction creation: The transfer of funds (the 20 tokens) is recorded in a transaction log.
Verification and approval: The recipient wallet verifies the signature on the permit, which has been signed by your contract. If everything is valid, they approve the transfer.
Permission update: Your contract's permission to spend these tokens remains active, but you no longer have direct access to them.
When Permitted Occur Transfers
Permitted transfers can occur in several scenarios:
Approved transactions: The recipient wallet has signed the permit and approved the transfer when moving your tokens.
Recipients sign permit: Recipient wallets verify their signatures on the permitted transfer permit before approving the transaction.
Potential Issues and Mitigations
While allowing transfers can be useful for token management, there are scenarios where they might not work as intended:
Wallets signing permits: If multiple wallet owners sign the permitted transfer permit, it may lead to inconsistencies in token balances.
Recipient wallets failing to approve: If a recipient wallet fails to verify or approve the transferred tokens, the transaction will fail.
Mitigating Risks
To avoid potential issues with permitted transfers:
Verify signatures: Always verify that the recipient's signature on the permit is valid before approving the transfer.
Monitor wallet activity: Regularly check recipient wallet transactions to detect any inconsistencies or suspicious activity.
Implement token management: Use a token management system to maintain accurate and up-to-date information about your tokens.
By understanding the permitted transfer rule in Ethereum, you can better manage your ERC-20 tokens and ensure that they are used as intended. While there may be scenarios where permitted transfers don’t work as expected, there are steps you can take to mitigate potential risks and maintain transparency throughout the process.