API is a way to interact with the system (In this case, it’s an Exchange) from an external application. This interaction is/can be restricted by the system(Exchange). A user can grant Access and Authorization using the settings on Exchange.
The access is a multi-level feature and could be one of the below options.“Read Only” or called “View only”— this will only allow someone to read your transactions to get an idea of what you are doing or provide you analysis about your transactions. Applications with this access CANNOT alter or perform any actions on your account. “Trade” — This is something used for allowing external applications to trade on your behalf. These could be high-frequency trading systems or brokerage accounts. Allowing this access is very risky and should never be granted to applications unless you TRUST them completely with trading on your behalf. “Transfer”— This access will allow the third-party applications to send and receive assets. This is not recommended to be granted to general third-party applications. This could potentially sweep away all your funds if left in wrong hands.
Now that you know what an API is and the differences between various access permissions, you can grant permissions knowledgeably.