Validator Compensation
This guide explains how Pilier covers validator operational costs and how PIL-to-EUR conversion works.
Reading time: 5 minutes
Philosophy: Enablement, Not Profit
Key principle: Pilier validators are non-commercial entities. The Foundation covers their operational costs — it does not pay them a salary or generate profit for them.
This model is analogous to how the EU funds participation in public infrastructure like eIDAS or GAIA-X nodes: the goal is to remove the financial barrier to participation, not to create a revenue stream.
Operational cost target: up to €500/month per validator (covers server hosting, monitoring, staff time — adjustable via validator council vote)
Sources:
- Transaction fees (100% to the validator that authors the block)
- Foundation operational support from the Validator Bootstrap Pool (during bootstrap phase)
The live testnet runtime (spec_version 102) has no protocol inflation, no staking, and no 95/5 fee split. Transaction fees go entirely to the block author. Foundation policy covers any gap between fee income and the operational cost target.
How Validators Receive PIL
Transaction Fees
Every on-chain operation pays a fee:
| Operation | Approximate Fee |
|---|---|
| Balance transfer | 0.001 PIL |
| Register document | 0.0025 PIL |
| Create DPP | 0.004 PIL |
| Update DPP state | 0.0015 PIL |
| Trigger agent | 0.005+ PIL |
Fee distribution:
Example: User creates DPP (0.004 PIL fee)
Fee split:
└─ 100% to block author: 0.004 PIL
The validator that produces a block receives the fees from all transactions in that block. Over time, fees rotate among the active validator set roughly evenly (each validator produces roughly the same share of blocks).
Foundation Operational Support (Bootstrap Phase)
During the early phase (Year 1–2), transaction volume may be low and fees alone may not cover operational costs.
Solution: The Foundation covers the gap from the Validator Bootstrap Pool genesis allocation, up to the operational cost target.
Operational cost target: up to €500/month per validator
Example (3 validators, Year 1):
├─ Monthly transaction fees: €200 total
├─ Average per validator from fees: ~€67/month
├─ Gap to target: ~€433/month
└─ Foundation support: ~€433/month per validator
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Total coverage: up to €500/month per validator ✅
Phase-out timeline:
Year 1–2: Foundation support (low tx volume)
Year 3–4: Declining support (adoption growing)
Year 5+: Zero support (self-sustainable via fees)
Infrastructure Grants
Available for validators with constrained budgets.
Eligible entities
- NGOs with limited IT funding
- Universities in underfunded departments
- Public bodies with strict budget constraints
Grant types
Hardware subsidy:
Up to €1,000 (one-time)
├─ Server purchase or initial cloud setup
├─ Networking equipment
└─ Backup hardware
Hosting subsidy:
Up to €200/month for 12 months
├─ Cloud hosting (OVH, Hetzner, Scaleway)
├─ Bandwidth costs
└─ Backup hosting
Apply by emailing treasury@pilier.org with entity details, expected node count, and budget.
Reward Management Policy
PIL received by validators is subject to the Foundation's monthly threshold policy.
Within the monthly threshold (up to €500)
The validator chooses how to allocate earned PIL up to the operational cost target:
Option A: Exchange with Foundation
├─ Send PIL to Foundation treasury
├─ Receive EUR at 1:1 rate (within 7 business days)
└─ Use to cover hosting, DevOps, admin costs
Option B: Reserve PIL
├─ Hold earned PIL in the validator's wallet
└─ Use for future operational costs or governance
Excess rewards (above monthly threshold)
Any PIL earned beyond the monthly operational cost target must be returned to the Foundation. It is routed to the Civic Treasury to sustain free network access for public good actors.
Example: validator earns 800 PIL/month
├─ Up to 500 PIL → validator's choice (exchange or reserve)
└─ 300 PIL excess → returned to Foundation → Civic Treasury
PIL to EUR Exchange Process
Monthly cycle
Step 1: Confirm earned PIL
Review the validator's wallet balance for the month. PIL comes from transaction fees earned as block author plus any Foundation support.
Step 2: Email Foundation treasury
To: treasury@pilier.org
Subject: Monthly PIL to EUR Exchange - [Month/Year]
Entity: [Your entity name]
Validator: [Your validator ID]
Amount: [X PIL]
Period: [Month Year]
IBAN: [Your IBAN]
BIC: [Your BIC]
Step 3: Foundation confirms (within 24 hours)
├─ Confirms amount
├─ Confirms exchange rate (1 PIL = €1.00)
├─ Provides transaction reference
└─ Expected transfer date (within 7 business days)
Step 4: Transfer PIL to Foundation
Use the standard Polkadot SDK transfer extrinsic or a wallet UI to send PIL to the Foundation treasury account.
Step 5: Receive EUR via SEPA transfer
Exchange rules
| Rule | Value | Reason |
|---|---|---|
| Frequency | Monthly (recommended) | Aligns with expense cycles |
| Maximum | Up to monthly threshold | Excess must be returned, not exchanged |
| Minimum | 100 PIL per transaction | Avoid micro-transactions |
| Rate | 1 PIL = €1.00 (fixed) | Predictable budgeting |
Emergency exception: Hardware replacement or urgent expenses can request off-cycle exchange with justification to treasury@pilier.org.
Notes on Staking and tPIL
The current testnet does not use pallet-staking, bonding, slashing, or tPIL. Validators are permissioned Proof-of-Authority nodes. The set is managed by a validator council vote (supermajority 3/4), with the Sudo key retained as an emergency override.
Staking, tPIL, and token-holder governance are future design ideas that may be introduced later via runtime upgrades. They are not active in the current testnet.