Parcl Floats Crypto Derivatives on Real Estate Values

Earlier in May, proptech company Parcl announced a $7.5 million funding round. Taking part in the funding were current investors Archetype, Dragonfly Capital, Shima Capital, Solana Ventures, Not Boring Capital, and FJ Labs. New investors included Fifth Wall, JAWS, the family office of Barry Sternlicht, IA Capital & Eberg Capital, Big Brain Holdings, and angel Santiago Santos.

Significant cash. Parcl, not to be confused with the former similarly named e-commerce company, touts itself as “a digital real estate protocol built on Solana, a blockchain specifically designed to host decentralized and scalable applications,” that “allows users to invest in and trade-specific geographical markets” and which “requires no minimum investment, offers immediate liquidity, and carries low transaction fees,” according to information sent to GlobeSt.com by its PR firm.

“The Parcl Protocol allows users to invest in and trade specific geographical real estate markets, enabling directional investment and hedging strategies in this traditionally opaque and walled-off asset class,” the release said. “An individual Parcl is a digital representation of the price per square foot/meter in each real-world geographic area, collateralized by crypto assets.”

Here’s where things might get sticky for the CRE professional. A number of companies are looking at allowing more people to invest in real estate at varying levels of entry. Some names include Realto, MarketSpace Capital, and LEX Markets. Fundrise offers a portfolio of properties with shares, at least for now, starting at $10 and annual 0.15% advisory fee and 0.85% asset management fee for a total of 1.0%.

Real estate investment is also available through ETFs and REIT shares available through online purchase.

All these options—without any judgment as to their quality or value—are tied to hard property assets. There are the underlying and hopefully appreciating value and rental incomes.

That’s not the case for Parcl, which is technically a “synthetic protocol,” or the crypto equivalent of a derivative. As other information sent by the company’s press representatives said, “The protocol allows for the creation of synthetic ‘Parcls’ which are tied to a valuation index that is representative of the average price per square foot within a given neighborhood.”

They call this “exposure to high-value real estate,” but like derivatives in general, there is no claim on the true assets, just an “investment mechanism” into something that looks at the value but doesn’t directly partake. Given the recent rapid multi-billion dollar value crash of the luna cryptocurrency, that was supposed to be indirectly tied to the US dollar, as C/NET reported, betting that a digital asset will keep its value because of a real-world one isn’t a given.