Token Picks: Parcl
Parcl, an AMM perp dex on Real Estate
What’s Parcl?
Parcl is an AMM perps dex for the real estate market; the project enables users to trade or speculate on geography specific real estate indices. - The project has a star studded cap table, raising US$11.6 million in total during 2022 from @dragonfly_xyz, @paraficapital, @cbventures, @SolanaVentures and more.
Influenced heavily by @synthetix_io, the project plays on a peer-to-pool model, where liquidity providers are taking on the other side of the net trades.
To utilise the protocol, it’s fairly simple:
Head over to Parcl’s dApp and connect your @phantom wallet.
Choose which geography (Denver, Chicago, etc) and which market (sales or rental) you wish to speculate in.
Select your leverage and either long or short at the mark price. However, be aware of the market sentiments as it determines the overall funding rates.
Long/short and hopefully profit.
Mechanism: AMM perps
Within Parcl, there are many isolated liquidity pool that provides traders the ability to long or short on the price of a real estate market, such as the sale prices of properties within Miami-beach.
To be clear, traders are trading on the PRICE of the particular real estate market and not on the underlying asset itself.
The prices are obtained through Parcl’s own proprietary oracle system. In essence as an individual, you are derivative trading on an index price rather than the underlying asset.
Liquidity providers of the isolated liquidity pools are the counterparties to the trades, taking on the overall net opposite position of traders within the pool.
As traders start to take long/short positions, this causes the price of the index (mark price) to deviate from the underlying asset’s price (spot price).
When the number of long positions exceeds the number of short positions, those in the long position will need to pay a funding fee to those in the short position. Additionally, those who wish to take on new long positions are required to pay a skew impact fee. This happens vice versa if the number of short positions are greater than the number of long positions.
These balancing measures reduces the incentives of taking on long positions, enabling a mechanics to shift the mark price towards the spot price and creating an overall delta neutral strategy for liquidity providers.
Traders can also easily leverage up through perps, resulting in a more sensitive trading band compared to others.
Is it working?
The overall concept of Parcl seems to be pretty sound; it provides an opportunity for web3 natives to speculate on real estate prices.
However, the metrics tell a slightly different story:
Accordingly to @DefiLlama, the TVL on Parcl stands at US$26.2M, a far cry away from other RWA protocols and its all the all-time-high of US$185.1M in March 2024.
Much of the TVL was lost after Parcl’s airdrop, conducted in April 2024.
Volume still remains high for certain isolated pools, with the top few seeing 24H volumes around US$200k to US$1M.
While puzzling at first glance, the high volume and low TVL could be explained by a number of reasons:
Real estate price speculation remains as a niche market. For the ordinary user, speculation on a specific geographical real estate market requires loads of due diligence and homework. The effort-returns ratio likely pales in comparison to many other DeFi opportunities out there. Parcl only providing USA specific real estate market prices also increases the barriers of entry.
A quick look at the returns from being a liquidity provider into the isolated pools reveals that they are in the red. For every dollar deposited into the liquidity pools, you are expected to lose 0.9214% after 30 days. This indicates that the directional risks of real estate has far outweighed the balancing mechanism that Parcl has introduced. Liquidity providers are therefore better off providing liquidity on other platforms like @coinbase that generates ~5.2% at a risk-free rate.
Tokenomics (as of 31 August 2024)
$PRCL today trades at US$0.1457.
The market cap stands at US$21.2M.
The FDV stands at US$146.3M, with circulating supply at 14.5%.
The volume of $PRCL remains high at US$14.6M, with most of it generated in CEX such as HTX, Bybit and OKX.
As of now, tokenomics are solely centred on governance and yield. A third utility, which is API access, is soon to be introduced.
$PRCL holders are able to stake to vote on certain governance aspects, such the introduction of new markets. One example is the current ongoing vote to accept their first foreign real estate market, Dubai, into Parcl.
$PRCL holders can stake to earn inflationary yield. These require lock-ups period.
$PRCL holders can soon stake to access real-estate data, which should potentially provide them with a leg up compared to other traders.
Conclusive Thoughts
At its core, Parcl does the job of unlocking access to illiquid assets in a simple and clean manner, through their perp dex mechanism.
However, with the limitation of it being only to the USA market, it severely hinders the crowd base which they can tap into.
Additionally, the perp mechanics currently implemented do not incentivise liquidity providers, resulting in poor performance in terms of TVL.
The tokenomics also remains spotty, with a large portion of the total supply still vesting and staking being inflationary in nature. Most of the utilities are a distant away from the actual product of trading; however, it is understandable that balancing between rewarding liquidity providers and $PRCL holders is not an easy feat.
The team still remains committed towards expanding Parcl’s ability, shown by the ongoing voting for the acceptance of its first foreign real estate market, Dubai. Additionally, new utility designs are being introduced, such staking for API data feeds. While I do personally like the usage of crypto mechanics towards TradFi markets, the current mechanism for Parcl still seems to need greater fine tuning. Greater adjustments of the perp mechanics and tokenomics with the addition of new markets should help push @Parcl to greater levels.