> For the complete documentation index, see [llms.txt](https://docs.inqud.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.inqud.com/crypto-recurring/explore/how-it-works.md).

# 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                                                                                                                                                      |
| ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| <p>Fixed amounts charged at regular intervals (e.g., monthly). The user’s approval allows these scheduled transactions to occur automatically.<br><br>Inqud schedules invoices automatically according to plan.</p> | <p>Variable amounts based on usage, such as services where payment amounts fluctuate based on customer activity.<br><br>Merchant creates invoices via Inqud API</p> |