# How it works
At the core of Inqud's recurring payment system is the **ERC20 Approve** function, which is essential for managing automated transactions on the Ethereum (EVM) blockchain. Here’s a detailed look at how it works and integrates with the Inqud system:
### **ERC20 Approve Function**
The ERC20 approve function is a standard method in Ethereum’s ERC20 token contract. It allows a token holder to authorize a specific address (in this case, an Inqud-managed address) to spend a specified amount of tokens on their behalf.
* **User Authorization:** The user interacts with their Web3 wallet to approve the Inqud smart contract, allowing it to spend a certain amount of their ERC20 tokens.
* **Smart Contract Role:** Once approved, the smart contract can execute transactions up to the approved limit without needing further user intervention.
### **Setting Up Recurring Payments**
The process begins with the user granting approval for automated transactions:
* **Approval Transaction:** This involves a blockchain transaction where the user approves the smart contract to spend their tokens.
### Executing Recurring Payments
| Subscription Plan | On-Demand Plan |
| ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| Fixed amounts charged at regular intervals (e.g., monthly). The user’s approval allows these scheduled transactions to occur automatically.
Inqud schedules invoices automatically according to plan.
| Variable amounts based on usage, such as services where payment amounts fluctuate based on customer activity.
Merchant creates invoices via Inqud API
|