In this edition, we’re briefing you on Parcl.
Parcl belongs to a growing group of RWA/DePIN projects on Solana. It functions as a perps platform for real estate, allowing speculators to long or short entire city indexes.
Both RWA and Solana based projects are gaining traction as of late. When a trend forms, we make sure to provide informative coverage for our readers…
Stay alert in the markets ⬇
Background & Origin of Parcl
Parcl is a perpetual real estate market protocol.
The project is built on Solana, along with several other RWA / DePIN projects on the network.
Trevor previously managed portfolios focused on technology equities related to software, internet payments, and fintech investing.
Parcl allows users to go long or short with leverage using city indexes representing property prices.
Parcl provides exposure to real estate markets for both bullish and bearish traders.
The use case is expected to gain traction as liquidity increases and new products are introduced.
RWAs are one of the most anticipated sectors within crypto to see inflows of capital.
Real estate is a key cornerstone of the RWA genre, as well as treasuries.
Origin of Parcl
During the COVID-19 pandemic, there was significant volatility in the real estate market.
Trevor, the Founder of Parcl, wanted a way to effectively bet on real estate markets without owning physical properties.
Fractionalizing real estate by buying a house, splitting it up, and offering it to users had been attempted before but required substantial capital and time for physical infrastructure.
To overcome the challenges of fractionalizing real estate, the Parcl team decided to create price feeds that track the price per square foot of real estate based on sales and listing data.
These price feeds would serve as a reference price for an index that could be traded on blockchains like Solana.
The blockchain allows for efficient settlement of transactions and peer-to-peer clearing with a small and efficient team.
Parcl initially did not start with perpetual contracts but found that the blockchain was well-suited for them.
Why Parcl Chose Solana
In the summer of 2021, Parcl made the decision to use Solana as their blockchain platform.
They considered its speed, scalability, low fees, and good wallet infrastructure as key factors in their decision.
He adds that network outages have been a challenge for Solana but are being addressed through redundancy measures like Firedancer.
FTX leaving the ecosystem created a liquidity hole but it seems like things are moving past that now.
Solana TVL recovery following FTX crash
Rejuvenated DAU for Solana Network
Trevor says that despite challenges, there are dedicated teams building on Solana that should benefit from its resurgence in popularity.
The team is now seeing a shift in sentiment and increased interest in using applications on Solana.
Circle has developed a cross-chain transfer protocol (CCTP) that allows for the automatic transfer of USDC across different blockchain networks.
This protocol could greatly enhance liquidity on Solana by acting as a bridge between chains.
Parcl price feeds
Trevor says that existing home price indexes like Case-Shiller update monthly on a two-month lag, which is not sufficient for real-time market analysis.
Companies like Zillow and Redfin provide monthly price indexes, but these are also delayed by a month.
In response to a lack of available data, Parcl Labs decided to create their own price feeds to provide real-time pricing data.
They collect sales and listing data daily to generate these price feeds.
Parcl Labs has developed proprietary technology to collect sales and listing data.
They have an API that connects to the blockchain via an Oracle to pull in the data.
The output of their price feed includes information such as current trading prices, Oracle prices, market prices, and historical charts.
There is value in the real estate pricing data that Parcl collects.
They have generated revenue from selling or licensing the data.
Parcl Labs' price feed has been featured on CNBC and cited by Moody's in their single-family rental analytics report.
Basics of trading Parcl real estate markets
Users can connect their Solana wallet to access live markets on the Parcel platform.
Once connected, users can choose from various live markets (not all available in V3 yet).
Users can deposit $USDC and specify their position size to go long or short on the price of real estate in a specific location.
Leverage of up to 10x is available for synthetic positions.
The outcome is that users are either long or short on the price, and they compete against other participants in the pool.
Parcl Trading UI
There are 6 markets currently available to trade, comprised of top US cities
The counterparty for trades on Parcl platform is a unified $USDC pool.
Liquidity provision is simplified with one pool instead of fragmented liquidity pools.
This approach aims to deepen liquidity and bootstrap interest in trading on the platform.
Parcl Labs is considering adding liquid staked SOL as collateral in addition to $USDC.
They are exploring ways to make it easier for users to onboard onto the platform.
The current architecture of the Parcl platform allows for adding any market with a $USDC price feed.
While Parcl Labs focuses on real estate, they are thinking about incorporating other markets.
They aim to create a unified experience across different markets within the Parcl ecosystem.
Three Main Improvements Added in Parcl V3
Users wanted more liquidity as there were a lot of dollars left on the sidelines due to scalability issues. The architecture needed improvement to handle increased liquidity.
Users also requested a more dynamic fee structure that incorporates velocity. The funding rate should move faster when the skew gets heavier and slower when the skew is not as extreme.
Users found complexities in dollar accounting with LP tokens having their own exchange rate based on trader P&L. It was difficult for traders to understand how much they would make or lose, which was a non-starter for real traders.
Who uses Parcl?
According to Trevor, users include individuals without property who want exposure to real estate markets, homeowners looking to hedge their investments, and commercial real estate owners.
Hedge funds are also potential users as they make bets in the real estate market.
Risk in Parcl
Trevor states that security is taken seriously with everything audited and an audit report available on the documentation site.
Risk management focuses on balancing pools effectively while protecting LPs and providing a good user experience.
He adds that price impact and funding rates are used as part of a dynamic risk system to balance pools effectively.
Unique use cases possible with Parcl
Real estate is the largest source of measurable wealth globally but lacks hedging options compared to other financial assets.
Parcl aims to bridge the gap between institutional and retail investors by providing a hedging solution for both segments.
There is an option to participate in both the upside and downside of markets.
The goal is to create liquidity and allow natural participants to engage in these markets.
Many people are locked out of real estate opportunities due to barriers like down payments.
Parcl provides a tool for individuals to participate in real estate with as little as $1.
This use case demonstrates how DeFi can enable broader participation.
Thoughts on a Parcl token
Parcl has explored token integration but has been patient due to market conditions.
They will be monitoring macro and idiosyncratic perspectives before making any decisions.
User acquisition initiatives, such as partnering with Asset Dash for trading contests, are underway.
Tokens could potentially serve as a base if decentralization becomes a future consideration.
Roadmap for next year
Trevor says that Parcl will soon partner with Asset Dash, offering a dashboard for holdings and other features.
A point system will be launched within 45 days, providing users with additional benefits.
More markets will be rolled out on the platform, enhancing the trading experience.
Potential expansions into new geographies are being considered for the first half of next year.
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