Temporary ERC-20 approvals: A cheaper & safer way to do DeFi

Circle Internet Financial discusses the introduction of a proposed extension to ERC-20 tokens, known as Temporary Approve (ERC-7674), which aims to enhance security and reduce gas costs for decentralized finance (DeFi) users by leveraging Ethereum's transient storage feature. This extension allows ERC-20 token approvals to be valid only for a single transaction, mitigating the risk of exploits from standing approvals. Unlike the existing ERC-20 approvals, which persist and expose user balances to potential vulnerabilities, Temporary Approve utilizes transient storage, introduced in Ethereum's Cancun upgrade, to provide a safer and more cost-effective solution. While currently available for smart contract accounts, future updates like EIP-7702 are expected to extend this functionality to externally owned accounts, potentially revolutionizing the efficiency and security of DeFi transactions. OpenZeppelin has already developed a draft implementation of this extension, and feedback from the community is encouraged to refine and finalize the proposal.