Imagine owning just one square foot of a luxury condo in Miami. How about adding a few square feet in San Diego? And if you think Austin is booming, why not buy ten feet downtown to add to your coast-to-coast real estate empire? Imagine being able to do this at the click of a button!
Sadly, traditional real estate doesn't work this way.
You need to take time to identify good neighborhoods, find a physical property (say a house or a commercial building), decide whether to go solo or join with other investment partners, then buy the whole piece of real estate.
That usually comes with a host of other challenges—securing a mortgage, making those payments, dealing with tenants and collecting the rent on time, managing the property or hiring a property manager, understanding tax implications, and the list goes on.
Unlike owning the actual house, Parcl lets users buy and sell digital versions of real estate that track the actual price of real estate assets in specific locations.
This way you can pick where and how much you want to buy. Because this is done digitally, it all happens at internet speed. Using blockchain technology ensures you don't need to worry about trusting intermediaries, so there are no realtors and no big commissions.
So what are you buying? You're not buying the actual house or a square foot in it. You're buying a stake in a digital market that tracks to the actual underlying asset, and you're able to trade your stake with others interested in getting into that market.
In simple terms, Parcl pulls mountains of data from various sources to calculate an average price per square foot for a given neighborhood. Parcl does this for a growing number of neighborhoods around the country to get real-time prices that can be relied upon.
For example, if you wanted to buy one square foot of real estate in Miami, it might cost $609. With this information, Parcl then creates Miami-specific tokens that can be bought and sold at $609 each. Anyone can mix and match to build out their own digital real estate portfolio. There are infinite possibilities.
Part of the innovation that Parcl brings is using a new technology called blockchain that enables this to work and reduces inefficiencies. By creating these tokens on a blockchain, they can then be shared freely. Using a blockchain also frees owners of Parcl tokens from needing to work with intermediaries such as real estate brokers.
We'll cover this in greater detail in later posts, but in summary, you buy these from the Parcl website using your web browser. We will list out different neighborhoods on the platform and then provide a link to buy and sell Parcl tokens directly. We provide detailed information and price trends for each neighborhood to help you form a better financial picture of that location.
To buy or sell, you'll need a crypto wallet with digital dollars that you can then use to buy Parcls at the going price on the network. It's that simple. For those unfamiliar with how to do this, we'll be providing a detailed walk-through of how to set up a crypto wallet, fund it with digital dollars, and make your first buy or sell trade.
Blockchain protocols have another ace up their sleeves. In traditional finance, the organization that builds an exchange charges and collects all the transaction fees.
Conversely, our Parcl protocol is designed to share the small transaction fees directly with participants who provide the money (capital) needed to create the trading environment. These so-called 'liquidity providers' (LPs) enable the system to operate smoothly, so they get rewarded for this activity.
LPs fund the trades, allowing people to buy or sell their position at any given time.
Therefore, any Parcl user can provide this liquidity to our network and start earning rewards for their help. This incentivizes more supporters of the platform, which improves the system's performance.
You may have heard the term decentralized finance, often shortened to "DeFi," and wondered what it means.
Parcl is a great example of a DeFi protocol, where distributed and decentralized individuals come together to provide liquidity and create a platform on which they can trade Parcls for many real estate locations.
This win-win demonstrates the power of DeFi to open up new opportunities for everyone to participate in the promise of real estate.
Stay tuned for follow-up articles where we walk through the steps to buy and sell Parcls and provide liquidity for the platform.
Check out our easy to follow "What is Parcl?" video explainer!