Crypto glossary

Spending Cap

A spending cap is the maximum number of tokens you allow a smart contract to move from your wallet. Instead of granting an unlimited approval, you set a deliberate limit, so a bug or a malicious contract can take at most that amount.

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Where you meet a spending cap

Before a decentralized exchange, lending app or bridge can use your tokens, it asks for an approval: permission for its contract to spend a given token up to a certain amount. Many wallets now show that amount as a spending cap and let you edit it before you confirm. The app proposes a number, often unlimited, and you can replace it with your own.

The cap is stored on the blockchain as the token allowance. Each time the contract uses your tokens, the remaining allowance goes down. When it reaches zero, the app has to ask again.

A worked example

Say you want to swap 300 USDC for ETH. The swap site requests an unlimited approval for USDC. You change the spending cap to 300 and confirm. The swap uses the full 300, and the allowance drops to zero. Months later, if that contract were compromised, it could take nothing more from you, even if you then hold 10,000 USDC.

If you had left the request at unlimited, those 10,000 USDC would have been exposed for as long as the approval existed.

Choosing a sensible number

For one-off actions, set the cap to exactly what you plan to use, or slightly more if fees or price changes could matter. For an app you use regularly, a moderate cap is a trade-off: high enough to avoid paying for a new approval every time, low enough that a failure would not be catastrophic.

Watch the decimals and the token name. Entering 300 in the wrong field, or approving a different token than you meant, defeats the purpose.

What a spending cap does not protect

A cap limits how much one approved contract can take. It does not help if you approve a scam contract with a cap equal to your whole balance, and it does not cover signatures that grant other rights. Some tokens, such as USDT on Ethereum, require you to set an existing allowance to zero before setting a new non-zero value. Old approvals stay active until used up or revoked, so check them now and then.

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Frequently asked questions

What should I set my spending cap to?

For a single action, the amount you actually intend to use. For a frequently used app, a level you could afford to lose if that contract failed.

What happens if my spending cap is too low?

The transaction fails or the app asks for a new approval. You lose a small network fee, but no funds.

Can I change a spending cap later?

Yes. Sending a new approval replaces the old allowance, and revoking sets it to zero. Each change is an on-chain transaction with a fee.

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All glossary terms · Educational reference only — not investment, legal, tax or financial advice.