Editor | Wu Blockchain about Blockchain
Parcl is a groundbreaking platform based on Solana that aims to revolutionize the traditionally illiquid real estate market by introducing asset liquidity. Its real estate data analysis platform and popular market allow users to browse global real estate market indices and realize cross-margin perpetual contract transactions. The previous two rounds of financing totaling US$11.6 million show the huge interest of investors in Parcl. In this conversation with its co-founder Kellan Grenier, we discussed the platform's technical framework, how to overcome the challenges of the real estate industry, future token issuance strategies, and the innovative potential and complexity of blockchain technology to modernize real estate transactions.
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Parcl Introduction
My name is Kellan, and I co-founded Parcl DevCo with two partners about two and a half years ago. Our main goal is to drive innovation in the residential real estate sector. Our work focuses on building a modern data analysis platform about real estate and developing a liquid market that can facilitate investors to access the real estate asset class. We are particularly focused on property prices in large metropolitan areas, and plan to expand to more communities and rural areas in the future, all based on blockchain technology.
What is the competitive advantage of Parcl’s real estate index?
At the heart of Parcl is its unique property price index, provided by Parcl Labs as part of Parcl's broader real estate data analysis. We use a new technology system to integrate all publicly available data on residential real estate transactions and price changes. This data covers a wide range of analysis from individual properties to entire cities and metropolitan areas, and can be accurate to the median price per square foot.
The process of developing this price index involved more than a year of research and development, data integration and model optimization, allowing us to capture every transaction in the real estate market in real time - whether it is a sale, price adjustment or contract signing. From an initial focus on the North American market, our research scope has expanded to the UK and will soon cover Singapore, Hong Kong, Japan, South Korea and Australia, aiming to index global real estate.
This technological breakthrough enables Parcl to create markets around these real-time prices and enable true buy and sell liquidity. This real-time price feed combined with decentralized applications introduces an innovative approach to the real estate sector, in stark contrast to products that are difficult to achieve with traditional financial systems due to scale or legacy technology limitations.
Parcl Labs' price feeds capture market activity more fully than existing benchmarks such as Case-Shiller. For example, Case-Shiller focuses primarily on repeat sales of single-family properties, ignoring a large portion of the market such as condos and multi-family homes. In contrast, Parcl Labs includes a wider range of real estate transaction types, providing a more accurate and comprehensive view of market dynamics.
Our methodology inherently adjusts for outliers and focuses on identifying the median price per square foot as the most representative real estate valuation metric. This flexibility allows for in-depth analysis from the national level to specific neighborhoods, providing an unparalleled tool for those interested in real estate data, or those who wish to gain market exposure through the Parcl trading platform. This innovative approach and the modern technology behind it constitutes Parcl's competitive advantage, providing a unique and highly valuable resource for the real estate market.
Does Oracle manipulate prices?
In the cryptocurrency space, the word “Oracle” often brings to mind issues of price manipulation. Given the sheer volume of properties we cover and the detailed historical data on millions of properties, attempting to manipulate prices for liquidation purposes is nearly impossible. While almost nothing is impossible, executing such manipulation on our platform would be extremely difficult. Effectively influencing an oracle and manipulating the market would likely require billions of dollars to buy or sell properties or properties. If you wanted to influence the market across New York City, you would likely need even more.
In addition, the real estate transaction process introduces a significant time factor, often taking weeks or even months to complete a transaction, and is accompanied by a large number of legal procedures and transaction costs. This complexity and the slow nature of real estate transactions inherently hinder manipulation attempts, making any potential incentive meaningless.
The inherent characteristics of real estate — its sheer size, slowness of transactions, and illiquidity — while challenging, also present opportunities. By leveraging powerful data sources, we can create a liquid market around an otherwise illiquid asset class. However, these same characteristics make it difficult to manipulate the market on the spot, help ensure a seamless oracle verification process, and establish a trusted data source and market.
As development progresses, we consider potential security vulnerabilities closely and implement mechanisms to minimize risk. The principle of gradual decentralization over time looks the most meaningful. While some degree of centralization can be beneficial in the early stages of many applications, as the platform scales and achieves redundancy, especially in price feeds, moving toward decentralization provides greater efficiency and security for everyone in the network. This approach outlines our path forward in addressing the issues of price feed and oracle manipulation.
Why is it necessary to develop encryption products?
That’s a great question. My journey to making this a crypto product began when a co-founder and I were working at a hedge fund during the COVID-19 pandemic and observed a significant increase in asset volatility and structural shifts, particularly around work-from-home models. This shift altered the traditional relationship between where people live and work, sparking our interest in using financial markets to express our views on these changes. We were intrigued by the idea of trading based on these observations, such as long Miami and short New York, or exploring similar trades between Austin and San Francisco, or even Lisbon and London. Our goal was to execute these trades in a liquid market that allowed for fast entry and exit, with minimal transaction costs and friction, and global access to capital.
However, we quickly realized that the traditional financial system lacked the infrastructure to support these types of transactions, especially given the short side of these trades. This realization led us to blockchain, specifically DeFi and Solana, which provide the required technical infrastructure for these novel use cases. DeFi is in its most significant growth phase, and Solana provides the speed, global capital accessibility, and low transaction costs we crave, despite initial concerns about network centralization and reliability.
Our product has evolved through many iterations to what we now have at v3, a truly perpetual decentralized exchange. We call this the continuous iteration and refinement from the initial concept to perpetual trading. This process started with a collateral position model, then evolved to a more complex virtual automated market maker model, and finally formed the model we see today. This series of developments was driven by our desire to create a product that not only meets the needs of retail and institutional traders and unlocks market liquidity, but also provides solutions for a range of real-world scenarios, such as hedging risks in primary residences or managing risks in large construction projects.
In summary, the decision to do this as a crypto product was driven by the unique ability of blockchain technology, specifically Solana, to realize our vision of a liquid, efficient, and accessible market for trading real-world asset volatility. This not only allows us to approach financial markets in an innovative way, but also solves fundamental problems and creates a tool to effectively manage risk, demonstrating the inevitable superiority of perpetual financial instruments for these purposes.
How far is Parcl from being a “real” user?
We are fully committed to exploring the huge potential of Parcl in solving real-life challenges, with the goal of attracting and retaining users through a comprehensive strategy. The vision of Parcl as a tool that is closely integrated into our daily lives and provides innovative solutions for various real-life scenarios is ambitious, but it is completely based on practical foundations. For example, by providing a new type of insurance for properties in areas at risk of flooding, Parcl has demonstrated its ability to address specific risks, which is just a glimpse of its diversity of applications. Parcl's capabilities go far beyond traditional financial transactions, and its real value lies in providing users with solutions with far-reaching impacts.
We envision an ideal future where Parcl becomes an integral part of everyday financial strategies. Of course, this comes from challenges ranging from market liquidity and scale to regulatory frameworks. For example, institutional use cases require large-scale markets to minimize the cost of hedging or risk optimization strategies, which highlights the need for mature markets. Regulatory clarity and alignment are also critical to ensure that these innovative financial products can be utilized safely and legally.
Despite the challenges, I remain optimistic that these obstacles can be overcome. One of the keys to attracting long-term users is to increase awareness of the platform’s functionality and ensure that the market operates efficiently. Specifically, the cost of capital, represented by the funding fee for perpetual contracts, needs to remain predictable and stable, especially for users who want to use Parcl for long-term strategies such as home insurance or hedging against market fluctuations in their primary residence.
As the Parcl market develops and becomes more efficient, I expect many real-world use cases to emerge. This will further foster an active ecosystem where strategies related to these use cases can thrive. Creating a market characterized by efficient capital deployment and a wide range of use cases will not only benefit individual users, but will also promote the wider acceptance and success of Parcl. Achieving this goal depends on whether we can find the right path in the current complex regulatory environment and market dynamics, and ultimately usher in a future where Parcl becomes an important tool for retail and institutional participants, in which Parcl meets real-life needs through innovative financial solutions.
In addition to perpetual contracts, are there plans to develop other products?
Of course, Parcl’s future plans are not limited to perpetual contracts. Initially, we will expand our focus to cover a variety of real estate-related price information, such as rent and commercial property values. Based on extensive community feedback, we are also considering adding foreign exchange price information to better connect global markets, so there is a lot to look forward to in this regard.
Looking further ahead, I hope to be able to build a developer ecosystem that will leverage Parcl's underlying liquidity in the real estate space. This will open up a wide range of opportunities for innovation, including developing protocols that offer special insurance solutions or creating real estate indices. The concept of these indices is similar to ETFs customized for the real estate market. For example, an index might focus on the top 20 high-quality cities in the world, providing unique investment opportunities in the real estate market.
Our strategy has two main directions: first, to introduce new real estate price information so that it can be productized and integrated into the perpetual trading platform; second, to establish an ecosystem where developers can innovate and build on Parcl's liquidity. This two-way strategy aims to open up new strategies and solutions, significantly broadening the market utility and application scope of Parcl. Through these developments, Parcl intends to remain at the forefront of real estate financial product innovation, providing valuable tools and opportunities for investors and developers in this ever-changing industry.
What are the benefits of Parcl tokens for holders and users?
The Parcl Token (PRCL) is an independent project within our network that aims to support the Parcl ecosystem and drive its decentralization. As a governance token, its main responsibility is to manage trading rules and incorporate new markets and assets, such as rental information, into the platform. Our community has shown its value in governance, with over 2,500 members participating in voting on the direction of our product. This active participation shows the importance of governance to our ecosystem, ensuring that the products we provide are what our users truly need and want, while avoiding unnecessary risks.
In addition to governance functions, Parcl tokens provide exclusive access to the Parcl Real Estate API, providing real-time real estate data and insights. I believe this feature will become one of the most valuable parts of the Parcl ecosystem, allowing token holders to interact with our API in novel ways, including using the ChatGPT plugin. This opens up countless possibilities for both individuals and institutions to gain insights and make informed decisions based on real-time data.
Finally, the token plays a vital role in the ongoing network incentive mechanism, which will develop into a permanent points program. This system will reward participants based on their contribution to the ecosystem, and the rewards mechanism will be tracked through a leaderboard. Therefore, the network token not only enhances governance capabilities and access to privileged functions, but also promotes a positive cycle of participation and rewards within the Parcl community.
As we look forward to launching our token in the coming weeks, the sense of anticipation is building in the community. We are at a critical juncture in bringing governance power, exclusive data access, and rewards for active participation to the Parcl experience. This comprehensive approach underscores our belief in the transformative potential of applying crypto to real-world scenarios, and envisions a promising future for the Parcl ecosystem and its members.
