đź’ Imagine gaining the ability to invest in real estate without the high barrier to entry and liquidity crunch: Introducing Parcl - A real estate investing platform for users to gain exposure to top real estate markets, powered by the Solana blockchain, one of the most scalable blockchain networks.
Investing in Real Estate?
You must be thinking why crypto natives would invest in real estate, when ✨blockchain is the future✨. Well, as we all like to believe, we are still early when it comes to blockchain and cryptocurrencies. As a result, crypto markets are still highly volatile (e.g $SOL has appreciated over 1000% and retraced completely within the last 2 years) and unsuitable as a short term investment asset. If treasury bonds return too little yield, and crypto and stocks are too volatile, what investment asset strikes a balance?
Enter real estate.
Real estate markets in the US grew about 8.8% in 2022 and has positive growth over the last 5 years (CEIC, 2022), while other indices such as the S&P 500 has seen both tremendous growth and drawbacks, having a negative return in 2022 of nearly 20% based on opening and closing prices for the year.
Real estate investing thus provides a more stable investment asset and store of value, making it an attractive hedge against a more volatile portfolio for crypto investors. This helps investors diversify their holdings with a less correlated market and manage their risk while still generating returns.
Parcl provides a platform for crypto investors to do so, all while still on the blockchain.
So what exactly is Parcl?
Parcl in essence is a synthetic real world asset (in this case real estate) trading protocol that is supported by automated market maker (AMM) pools (Parcl indices), which are priced using Parcl price feeds, powered by the Solana blockchain.
That was a mouthful, so let’s unpack it word-by-word:
Synthetic: Parcl does not own any physical real estate but instead uses Parcl indices to track the price per square foot of neighbourhoods across top real state markets. Hence, Parcl is a synthetic asset that represents the price of global real estate, providing exposure to users without purchasing the underlying asset.
Real world asset (RWA): Parcl brings real estate on-chain, in the form of liquidity tokens, making them highly liquidable and tradable by users. By bringing real estate on-chain, it tackles traditional challenges with real estate investing such as high capital costs and illiquidity, among many other issues of traditional real estate investing.
Automated market maker (AMM): Parcl uses AMMs to facilitate the trading of their isolated pools (i.e a city’s real estate market, e.g New York). Each pool has a single collateral stablecoin (USDC) and a single price feed (aggregated property data of a city). The pool uses mathematical formulas to determine the value of the position when opened (i.e buying/shorting an index) and closed (i.e realising payout).
Parcl price feeds: Parcl uses price feeds created by Parcl Labs which aggregates property records, public property listing data, county records, and various other sources of transaction history, fed into a custom valuation index. The price feed is outputted as a median price / sqft of the city on the platform and is used when determining the profit/loss of a position when closed.
Solana: Parcl is powered by the Solana blockchain, meaning the platform reaps the benefits of the network: Fast and cheap transactions, smart contract capabilities, interoperability between other protocols, access to a large and vibrant ecosystem etc. Being on-chain also promotes transparency and accountability, as all transactions (including deposits and payouts) made on the platform are visible via blockchain explorers. These factors allow Parcl to provide a smooth user experience for investors to access the global real estate market, all while being part of the wider Solana ecosystem.
The end result is a trading platform for users to gain exposure to global real estate markets on-chain, which is transparent and efficient, without the barrier to entry to traditional markets and in a much more liquidiable market, giving them more control and flexibility in their real estate investments.
So why Parcl?
Now that we know what Parcl does, why should users trade on Parcl for real estate market exposure? Here are some features that make Parcl stand out:
Invest in indicies instead of specific property: Parcl allows users to invest in entire cities based on Parcl price feeds. This minimizes property-specific risks such as location and maintenance. Users can even control their exposure by investing in multiple cities with varying position sizes.
Accessible and Ease-of-use: Parcl makes it easy for users to invest into a city of their choice with just a few clicks with no minimum investment. Choose your city, the amount, and the direction of your trade and you’re invested! Gain exposure to global markets with as little as $1.
Liquidity: Since Parcl functions using AMM pools, users are able to open/close their positions permissionlessly at any time, creating a liquid real estate market. Also as an extension, users can also provide liquidity to these pools to earn fees that are generated by traders of the pools!
Research: Parcl provides housing market information for each index, sourced from Parcl Labs datapoints, which can help users make an informed decision before longing/shorting a city’s housing market via the platform.
Security: Parcl’s smart contracts and accounts are all disclosed and visible on blockchain explorers, allowing anyone to view the transactions initiated by their smart contracts as well as the holdings of their accounts at any time. Parcl’s core smart contract has also been audited by Otter and Sec3, both leading blockchain security auditing companies.
Competitive Landscape
There are plenty of on-chain real estate protocols so what makes Parcl stand out from the rest? The biggest differentiation would be the investment product. For Parcl, you’re investing into a real estate index of a city, which is tracked via Parcl Labs price feed, while for other protocols you’re usually investing into a fractionalised property.
This means for other protocols, you’re a fractional owner of a specific property that is listed on the platform. This might sound good on paper, but many problems can arise with such a product. You’re vulnerable to property-specific risks and may also face liquidity issues when trying to close your position.
Parcl tackles these issues by allowing users to invest in indices instead, creating a platform where users can either long or short a city’s index, ability to take a leveraged position, and have high liquidity for permissionless opening or closing of a position.
How to trade on Parcl
Getting started on Parcl is as simple as purchasing an item on Amazon. 4 simple steps and you’ll gain access to the global real estate market for just $1.
1. Connecting your wallet to Parcl: Click onto the connect wallet and choose your preferred wallet (You may use any supported wallets such as Phantom or Backpack to get started)
2. Get the required tokens to trade on Parcl: You’ll require both SOL (Solana’s native token) and USDC (Stablecoin by Circle) which you can either transfer from centralised exchanges (e.g Binance), or directly on-ramp via Moonpay or Coinbase Pay on Phantom.
3. Select city index to trade on: Parcl has a wide range of city indicies to trade on such as New York and Chicago (international markets coming soon!). After clicking Trade, you’ll be able to see the current price/sqft listed on the city’s page.
4. Start Trading: Simply choose the amount you’ll like to trade, the direction of your trade (Buy if you think the price of housing in Chicago will increase, Short if you think the price of housing in Chicago will decrease), and the desired leverage, and you’re ready to go!
After clicking Trade, you’ll receive a confirmation note about your trade alongside the explorer link to your transaction that is indexed on-chain.
After completing your trade, you can manage your positions via Parcl’s Portfolio page, where you’ll see information about your positions.
Closing your positions is as easy as opening them: Simply click on the close button and a transaction preview will appear, where you can specify the amount of your position that you wish to close.
After submitting your Trade close, you’ll receive another confirmation note of your transaction with the total payout highlighted at the bottom. After 8 hours, the corresponding USDC amount will be deposited into your wallet and you’ll have successfully opened and closed a position on Parcl!
Aside from taking positions, you can also provide liquidity to specific markets, in which you’ll rewarded with a percentage of the fees generated by each market. However, as with providing liquidity to any AMM, there is a risk of impermanent loss if there is insufficient funds to payout positive traders from the deposits of the negative traders.
Parcl’s Community Initiatives
Currently, Parcl is also hosting a trading contest monthly for the top traders on the platform for a prize pool of 1000 USDC! Top 3 traders will receive 500 USDC, 200 USDC, and 100 USDC respectively while other traders who have at least 5 USDC exposure to any market get to enter a weekly raffle for prizes such as NFTs and whitelists for hot upcoming NFT projects.
Closing Thoughts
Parcl provides an innovative way for users to gain exposure to the real estate market while reducing traditional risks and barrier-to-entry that comes along with real estate investing. Users may look to Parcl to diversify their investing portfolio, especially during volatile markets, and still stay on-chain, allowing for streamlined management of their holdings.
Disclaimer
This is an article produced for Superteam’s Parcl Bounty. This shouldn’t be taken as financial advice. I would recommended for everyone to check out their whitepaper on their website to do your own due diligence on the mechanics of the platform.
Project Info and References
Website: https://www.parcl.co/
Twitter: https://twitter.com/Parcl
Discord: https://discord.gg/parcl
Docs: https://docs.parcl.co/
Whitepaper: https://parcl.notion.site/Parcl-v2 6f27eaed8a5e46e29762a9de128ba0f9
Parcl Labs: https://www.parcllabs.com/
If you made it this far, thank you for taking the time to read my article. I’m working on more of such research articles for DeFi and NFT projects across chains, feel free to let me know if you have any suggestions for future articles or feedback on Twitter.
Till then, the world is your oyster.
