Imagine owning just one square foot of a luxury condo in Miami. How about adding a few square meters in Paris? And if you think Austin is booming, why not buy ten feet downtown to add to your global 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.
With Parcl, there's a new way
Unlike owning the actual house, the Parcl Protocol 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 of one. You're buying a stake in a digital market that tracks to the actual underlying prices of real world real estate, and you're able to trade your stake with others interested in getting exposure to that market.
So how does Parcl work?
Parcl pulls mountains of data from various publicly available sources to calculate an average price per square foot/meter for a given neighborhood. Parcl does this for a growing number of cities and neighborhoods around the globe to get highly representative market prices, in real-time.
For example, if you wanted to buy one square foot of real estate in Miami, it might cost $609. With this information, the Parcl Protocol then facilitates the creation of Miami-specific tokens that can be bought and sold based on the Parcl Price Feed reference price. Anyone can mix and match market-specific tokens to build out their global real estate portfolio. There are infinite possibilities.
Part of the innovation that Parcl brings is through a new technology called blockchain that enables this to work in a trustless manner and reduces inefficiencies. By creating these tokens on a blockchain, they can then be transacted freely. Using a blockchain also frees owners of Parcl Protocol tokens from needing to work with intermediaries such as real estate brokers.
How do you buy and sell Parcls?
In summary, you transact these tokens via the Parcl Protocol app, using your web browser or preferred mobile crypto wallet. Different cities & neighborhood tokens will be available to mint on the platform, as will an automated marketplace to buy and sell Parcl tokens directly. Detailed information and price trends for each city & neighborhood will be provided to help you form a better financial picture of that location.
To buy or sell, you'll need a crypto wallet with digital dollars such as USDC that you can then use to transact Parcls at the prevailing AMM price on the Protocol. It's that simple. For those unfamiliar with how to do this, check out this detailed walk-through of how to set up a crypto wallet, fund it with digital dollars, and make your first trade.
Profiting from Supporting the ecosystem?
Blockchain protocols have another ace up their sleeves. In traditional finance, the organization that builds an exchange charges and collects all the transaction fees in a centralized manner.
Conversely, the Parcl Protocol is designed to share a portion of transaction fees directly with participants who provide the collateral (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 AMM pools, allowing users to buy or sell their position at any given time.
Therefore, any Parcl Protocol user can provide this liquidity to the 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'll walk through the steps to buy and sell Parcls and provide liquidity on the Parcl Protocol.
Check out our easy to follow "What is Parcl?" video explainer!