Our guests this week are Trevor Bacon and Kellan Grenier, co-founders of Parcl.
Parcl is a blockchain-native platform that allows users to trade real estate on Solana, democratizing access to the world's largest asset class. Parcl offers a unique architecture that enables users to make perpetual predictions on the median price per square foot of real estate in different markets across the US. Parcl also allows users to take long or short positions and provides a novel architecture that is purpose-built for low volatility assets without a liquid spot market.
Show Notes:
01:00 - Background / Origin Story
04:33 - Why Solana?
06:20 - Who is Parcl built for?
08:29 - How does Parcl work?
10:59 - How can Parcl help more traditional real estate users?
13:28 - Permission-less and composable
14:50 - Spinning up a new market
17:38 - Real estate royale.
19:13 - What's next for Parcel?
20:56 - A builder they admire in the Solana ecosystem
Full Transcript:
Brian Friel (00:00):
Hey everyone, and welcome to The Zeitgeist, the show where we highlight the founders, developers, and designers who are pushing the web three space forward. I'm Brian Friel, developer relations at Phantom. I'm super excited to introduce our guest, Trevor Bacon and Kellan Grenier, the co-founders of Parcl. Parcl is a synthetic asset protocol built on Solana, that allows users to invest in a digital square foot of real estate in neighborhoods worldwide. Trevor and Kellan, welcome to the show.
Trevor Bacon (00:33):
Thanks for having us. Appreciate it.
Kellan Grenier (00:35):
Great to be here, Brian.
Brian Friel (00:36):
Super excited to talk to you guys today. I just checked out Parcl app, and seeing all the feeds across the US, New York, Brooklyn, all these really awesome areas where you can trade. I think it makes perfect sense with what Solana was built for, has totally [inaudible 00:00:51] NASDAQ at blockchain speed. Before we dive into everything about Parcl, I'd love to learn a little bit about you guys. Who are you guys, and what made you start Parcl?
Trevor Bacon (01:00):
Thanks, again, for having us, Brian. I'll start. I'll pass it to Kellan. So prior to starting Parcl, Kellan and I worked together at a hedge fund focused on technology equities, internet software payments, semiconductors. And during COVID, there was a lot of real estate volatility, and there was, really, no way to trade real estate like we were trading stocks. And so we started to look into ways in which we could do that. There were options, like fractionalized real estate, or tokenized real estate, but they're limited by scale, because you need capital to buy properties that are fractionalized, and you need time to close those deals.
(01:36):
So we took a different approach, which is a top-down approach. We have created indexes that track the price per square foot, based on public real estate information and real estate transactions, basically, listings and sales. Those go into a database, and outcomes... A price per square foot, or a market price for neighborhoods and cities across the country today, in the US. Over time, we are going to be expanding into international geographies. And so that price goes out to the blockchain, and traders can, long or short, see these, based on their view of various locations.
Kellan Grenier (02:11):
I'll quickly give my background, Trevor covered most of it, but... Traditional finance background, most recently, at a hedge fund, before that, at a Japanese bank, and then at a market research firm before that, always covering tech hardware. That's how I got indoctrinated into blockchain, was modeling, how many, GPUs... The networks we're going to consume. And then, around COVID, with all the real estate volatility, and volatility across all assets, and no way to express a trade, that's what led to Parcl. It seems so obvious. Missing from the structure of markets was a liquidity venue for residential real estate.
Brian Friel (02:46):
Yeah, I think, myself and many others can resonate with that, especially with the amount of capital involved to get involved with real estate as a young person. It's very prohibitive. Trevor, maybe starting with you guys, you mentioned that you were at a hedge fund before this. Had either of you guys interacted with crypto before this? And was crypto one of the first things that came to mind? Kellan, you just said, this was obvious in hindsight, but was crypto the first tool that you reached for, or did you actually attempt... To be able to trade this with other methods?
Trevor Bacon (03:15):
Yeah. As Kellan mentioned, he had been indoctrinating the crypto for about five years, I as well. When you're on Wall Street, and there's trends, the banks, typically, showcase the companies that are prevalent in those trends. So I got early access to the management teams of consensus, and Ripple, amongst others. That's how it worked, but that's... When I got introduced to blockchain, that was the 2017 timeframe. So we refer to ourselves as using blockchain rails. The primary collateral on the Parcl protocol is USDC. And so it's, basically, dollars versus real estate prices.
(03:51):
For us, blockchain introduces an efficient exchange layer, and a settlement layer, that is scalable, and you can create a product like ours, with relatively, substantially, less resources than you would a traditional centralized exchange. And so at the same time we were starting this, DeFi was becoming much more prevalent, on the heels of DeFi Summer, which led us to start to explore the various ways in which you can pull capital in a distributed fashion. For us, it made sense. I think that's the main point of technology, is to drive efficiency. And blockchain really does that, for our use case, in particular.
Brian Friel (04:29):
On that note, was there anything in particular about Solana... Bright start on Solana?
Trevor Bacon (04:33):
Yeah. The technology thesis on Solana, which, I think, still holds true today is, it's fast, it's cheap, it's scalable. And we viewed that as something that would persist into the future. And so that fit well in this model, especially for real estate, given... It has lower volatility, and therefore, a lower return profile. So at the time, there weren't many viable EVM scaling solutions in the market. So this was in summer of 2021, arbitrary and optimism weren't quite there yet. And so that's why we decided to go on Solana.
Brian Friel (05:08):
That's awesome.
Kellan Grenier (05:09):
One thing I want to add there is, real estate is lower volatility, and therefore, has a lower return profile, but we've ran and done all sorts of analysis. It's sharp ratio, which is a measure of risk adjusted returns, is through the roof, in any given year, especially over the past two decades, it's just blowing everything else away. And it's really interesting, because residential real estate is the only asset that the majority of the population... Nearly everyone has access to a 5X leverage, through a mortgage. That's the gate to participate in the market, but you need the down payment, still. That's a pretty big gate. So introduce Parcl, basically, create the exact same return profile, tracking these underlying price feeds, the prices in these markets that are transactions in real world homes, and offer that to the masses. It's a pretty powerful product.
Brian Friel (05:53):
Yeah, let's dig into that a little more. That's a really great point you raised, Kellan. You have this background on Wall Street, you know what pro traders are looking for, you talk about sharp ratios of how sophisticated investors are looking access to this. But really, at the end of the day, I would argue that it's the little guy, it's young people, probably a lot of people who are interested in crypto too, who just want access to these markets, don't have the capital. You guys have clearly built a lot, but is there a particular type of user that you guys are looking to serve at Parcl?
Kellan Grenier (06:20):
Yes and no. There's a curve in terms of who would be interested in using this product. And obviously, it's fairly blockchain native today, especially in how it's delivered. You have a Phantom wallet, you have assets on Solana's blockchain, you connect to the dApp, and you interact with a smart contract. So small pool of people, but growing, hopefully, growing a lot over the next couple of years. But over time, this is a product that can onboard millions, and hundreds of millions, and maybe, eventually, billions of people into this ecosystem, because it's such a compelling offering. Everyone has a relationship with real estate, everyone's off sides, either they're too long, if they own their home, or they're too underexposed, if they rent. I think that opens up the aperture to who the core user is, right? Today, it's blockchain-native folks that have an interest in trading anything, but many of them in trading real estate, specifically.
(07:07):
Over time, it's going to be, very, much more like a tailored offering for people that are seeking this exact exposure, that, maybe, this is the first time they've ever interacted with a blockchain. And I think that that is what has everyone so excited, whether it's folks on Solana's team... You mentioned that you just started digging in, and as... You pretty excited, Brian. So it's truly like a killer app, consumer app for blockchain. And then eventually, institutions will use it, right? Because there's no venue for liquidity, in any scale, in residential real estate, it's just... There's definitely no short-side or sell-side liquidity. All the liquidity is long, and it takes forever, and high barriers to entry. So if you play that all out, there's a very large group of users in capital that is interacting with this product.
Brian Friel (07:50):
That's great. Yeah, let's go through that user journey there. You mentioned... Someone shows up for the first time, they have a Phantom wallet, maybe they're a longtime crypto user, and they're excited to participate in their first form of real estate, or maybe, this is, really, just a means to an end, they get a Phantom wallet just to purely go through this. What are some of the particular intricacies of the Parcl model? So you mentioned, this is a lot different from REITs, or fractional ownership. When a user connects a wallet, and they hit "Buy," and say they want to purchase real estate, essentially, in New York, or in the Brooklyn area, they think that area is going up, what are the terms of that purchase? What does the liquidity look like there? What do they need to know after they've decided to hit "Buy?"
Kellan Grenier (08:29):
It's a perpetual prediction, Brian. So these pools, every day, the prices update. And the price that you are trading is the median price per square foot in... I'll use New York as an example. What does that composed of? All five boroughs, every transaction, every sale that hits the county records, and then all listings, which represent the asking price, and that... All converges on this median, which is meant to be the market price. Every day, that price updates. There's a new price based on all the transactions that happened yesterday, and over the trailing couple weeks. And now, you have a new price. What you've noticed is that real estate, actually, moves on a daily basis, and perhaps, even hour by hour. An agent closes a home, they tell their other agent, now there's a new market price. So when people go to trade, that's what they're trading. And they're effectively making a perpetual prediction.
(09:16):
I believe I'm getting long New York at 600 and whatever dollars. And maybe I put in exactly 600, and whatever USDC. So now, I own one square foot of New York. And I can leave that open as long as I want. I could close it tomorrow, I could close it in a week. I'm effectively trading, investing, betting, however you want to define it, that that price will rise. On the other side, there's someone taking the other side of that. There's someone that's short. And what we found is that these markets, over time, generally, balance out. There's people that have different views on real estate. Sometimes, they tilt very long, and others, they tilt short. Everyone's short San Francisco right now, and it's tilted fairly short since this product launch.
Brian Friel (09:53):
I need to sign up for Parcl now, as I'm recording this from San Francisco. You guys are the ones in New York.
Kellan Grenier (09:59):
And Boston and Chicago, which have performed really well over the past couple months, are the two most long right now. And then, the rest of the markets are fairly balanced, but that can change overnight. The market reacts pretty quickly to changes in price, and changes in sentiment and news, and whatnot. So it's a really cool product. And in the simplest terms, you are effectively predicting that price will either rise or fall, and placing your wager accordingly.
Brian Friel (10:23):
That's an awesome picture you paint. And yeah, to that point, I'm going to need to load up my wallet here, and protect myself a little bit, from being in San Francisco. But you mentioned the idea of, prices are updating on a 24-hour basis here. Part of Solana's key advantages are that... It actually allows a product like this to exist, but there's another type of user that you alluded to a little bit prior, someone who's, maybe, already long real estate in the form of a big mortgage, and they're afraid that, maybe, they bid off a little more than they can chew, and they lever it up on a place in SF, before the tech crash, and they want to protect that. How can Parcl help a user like that?
Trevor Bacon (10:58):
That's a great question. I forgot the one other reason why we chose Solana with the wallet infrastructure. So shout out to Phantom, the plug, but it's actually true. What Parcl offers is native short exposure, if one so chooses. And today, there really aren't many ways in which... The short specific geographies. REITs are a common example of a real estate investment. However, REITs are usually types of assets spread across the country, think of data centers or apartment buildings. There's no geographic specificity. And so what Parcl offers is the ability for people to have specific geographies that they'd like to invest in, long or short. And therefore, you can make much more targeted investments, either for or against.
Kellan Grenier (11:43):
I would just add, this is so composable, and it's in the eye of the beholder, what this product can do. If you own a home, like we said earlier, and you just said, Brian, you're way overweight real estate, as a percentage of your net assets, most likely, and you have a big mortgage, it's your largest asset, it also is your largest liability. What if you wanted to hedge? How would you do that? You really cannot. There's really no way to do that without touching your loan structure, and that wouldn't be a perfect hedge anyway. So this is a product where you can get that short exposure whenever you feel like... You're offsides more than you want to be, you can come to this product, assuming you're eligible to use it, connect your wallet, place that short bet, lock in your paper gains, or protect yourself on the downside.
(12:25):
We talk to a lot of people, and they hear that, and they say, "Well, isn't this also like a synthetic insurance?" Say that there's a hurricane bearing down on Miami, no insurer would write you a policy in that situation. You could short Miami real estate to protect yourself. Obviously, you probably won't be alone. And the market's going to skew. And you might have to pay some funding fees, but it's available to you as a product. So there's so many novel elements that introduces... Like exposure that you just can't get anywhere else, whether it's protecting the gains that you've realized in your home, you don't want to sell it and move, or as an insurance product. It's limitless, how you can use it.
Brian Friel (13:04):
Kellan, you bring up a good point there, about the composable nature of this. And earlier, you guys mentioned, for every buyer, there's a seller. And obviously, this is a provision marketplace, anyone come up with a wallet, and connect wallet, and get started. So under the hood, how is that facilitated? I believe you guys are using an AMM. And some part of this... Because I see a section on your site about providing liquidity. Can you speak a little bit more of the mechanics behind that?
Trevor Bacon (13:29):
We permission the pools ourselves, Parcl, as the development company permissions the pools. And so we have the authority to launch pools. Over time, we see a potential path, where it's more permissionless, and people can use the AMM to spin up their own pools, have their own front ends, and have their own products. So I think one of the beautiful things about the protocol is that it can facilitate a lot of different types of products that we can't, or don't have the interest in creating, such as structured products options, as Kellan mentioned, insurance. So there's a whole ecosystem here, to be built. And I think it's incumbent upon us to facilitate developers over time, and once we think that the product's ready to release into a more permissionless environment, to facilitate that developer ecosystem, that we can underpin.
Brian Friel (14:16):
Yeah. I could see this whole world, where... It's already on chain, like you said, Solana is this giant, composable state machine. And it'd be really awesome to plug this, also, just into existing DeFi protocols, I'm thinking. You're on a drift, or you're on Jupiter, and you want to be making multiple swaps at once, you can, basically, bundle these into the existing DeFi activities you're already making on Solana. Maybe talk a little bit about that process of... What it's like today, to spin up a new market. What are all the pieces that are involved, both from a technical side... But I'm sure there's also, probably, a lot on the operational side as well. Maybe, Trevor, can you speak to that?
Trevor Bacon (14:51):
So now that we have the infrastructure in place, it's not terribly hard to spin up a new market. One thing to consider is that the data comes from a entity called Parcl Labs. And Parcl Labs has an API that has all the price feeds available to the public, and also for the Parcl protocols, Oracle, to consume. So if we were going to, let's say, launch a Paris price feed, so the price feed gets enabled in the API, on the Parcl lab side, the API connects to the Oracle, the Oracle connects to the smart contract, and there's the pool for traders to trade. So it's relatively simple. It's not without work, but we have the infrastructure in place to spin up. Currently, we have 15 markets we're launching, Austin, and then, I think we'll be in the international realm later this month.
Kellan Grenier (15:39):
This is a novel architecture. It is purpose-built for a low volatility asset without a liquid spot market. That defines real estate, that create redeem... Arbitrage isn't explicitly there. You could create a new house, I guess, and then come and hedge it on Parcl, like we just discussed, but that's a pretty elaborate process, way more complex than buying Solana on Jupiter, and then hedging the purp, or whatever. So what's great about the structure is that every participant in the pool is a liquidity provider. So you come in, and you make a trade, you're getting long. What happens is that, atomically, you're depositing USDC into the pool, and you're minting a liquidity token that represents your ownership interest in that pool. And then, simultaneously that notional value is getting locked into a smart contract, a decentralized smart contract, and that, effectively, recognizes where you entered the trade, what your price was, how much leverage you used, all of the elements of the trade that's relevant. And it stays locked in that contract until you, as the authority, comes in and closes the position effectively.
(16:36):
So that's how it works. And what's cool about that is that a new pool could be launched tomorrow, and start from zero. And then, Brian, you could come in and be the first trade. You could be a liquidity provider, or you could get long, you could get short. And you would be skewing that pool 100%, right? So unless someone else came in, you would, effectively, be paying yourself funding, perpetually, such that there was no gains to recognize or lose. But as soon as someone else comes in, that calculus changes, and now, you have a market. Now, it's a perpetual prediction market, a perpetual prediction AMM. And now, you have longs and shorts, effectively, paying each other. That's not exactly how it works, technically, but to the late person, that would be how it would work. So the beauty of that is, you can have a new pool every minute. And the main constraint is liquidity, but it's not, actually, a constraint, technically. So it's a really neat architecture.
Brian Friel (17:21):
The possibilities here are really exciting. And you mentioned one of the main constraints, not technically a constraint, but it is, is liquidity. So let's talk about some of the initiatives that we have, going on, to improve that. So I see that there's a new initiative here, called Real Estate Royale. Trevor, can you speak a little bit to what that is?
Trevor Bacon (17:38):
Yeah, so the Real Estate Royale is a contest series that we have, to familiarize people with the asset class, which is real estate, getting them to understand the product, how to use it. Every week, we have various prizes. And then, we have a monthly prize at the end, which is... USDC paid out to the winners. We've seen some pretty substantial gains with respect to monthly return percentages. I think last month, the winner, I think he was up 30%, which is pretty impressive, given that it's a relatively low volatility asset class. It's a way for us... Because it's a novel product, and it doesn't have, really, an analog in the real world, or something that's existing, it's a way for us to reach out to our users, get them excited and engaged, and then hear their feedback. So we conduct user interviews all the time, understand what folks need to get better educated, with tools they need to make their investment decisions. And our product team, which is excellent, is listening to that feedback and building for the user.
Brian Friel (18:34):
That's awesome. And I think now's a great time, on that note of the contest that are going on, to announce that. By the time that this episode's going to be going live, we have a special promotion with Parcl, which we're really excited to share. For the rest of the month, the first 500 new traders to Parcl, so you got to use a new address on Phantom when signing up, will receive a 10% discount for their first trade. You can learn more about that at parcl.cc/phantom. Trevor and Kellan, what's next for Parcl? You got, potentially, all these new markets coming out. Trevor, you mentioned Austin's coming live soon, potentially international. Where is your guys' focus? Maybe starting with you, Kellan. What's on the horizon?
Kellan Grenier (19:13):
Yeah. I think there are the three main things, is new users and opening up the access to as many people as possible, and helping them understand that this is something that's available to them, except for a couple jurisdictions around the world, unfortunately, the US being one of them. Hopefully, that changes much sooner rather than later. Yeah. New users, top of funnel, just introducing people to this product, letting them know that this is available, and that they can trade real estate just like they would trade anything else.
(19:38):
The other thing is expanding the offering. Trevor was teasing a couple new cities, new metros, some globally recognizable names, you can think, Paris, France, eventually, the United Kingdom, London, and then developed Asia. Eventually, it'll blanket the world, right? There will be a Parcl market wherever you live. So that's another thing that's super exciting. Trevor can touch on this, but how many different chains are, potentially, able to use this product as well? We started on Solana, for all the obvious reasons that we noted, but much larger crypto ecosystem in total, that can be addressed. So I'll pass it to Trevor to talk on that.
Trevor Bacon (20:13):
Yeah. I think, expanding geographically, because you have the ability and the capability to offer products that are dispersed globally, and then expanding the user base in terms of... Stepping into other ecosystems, such as EBM, which have their own pool of people and capital that are native there. So that's what's on the roadmap for the rest of the year.
Brian Friel (20:35):
All exciting things. As I said, we got a special promotion going, so it's a perfect time to check it out. I'll be signing up, protecting myself against the doll drums of living in SF here. Trevor and Kellan, one question I ask all of our guests, I'd love to hear this from each of you, and maybe starting with you, Trevor, is, who is a builder that you admire in the Solana ecosystem?
Trevor Bacon (20:56):
First, I'd like to shout out our team. The team is operating at an exceptionally high level, and they continue to execute against any bar, despite any macro hiccups that we may have, either globally, or in the idiosyncratic crypto space. One builder that... It's not the Solana ecosystem, per se, but I think, given all the scrutiny, Brian Armstrong has stepped up, and has largely become the future of crypto. He hasn't backed down. He's shown a lot of fortitude against the government, which he's asked to be regulated many, many, many times. And it's a tough fight, but he's standing strong. And it's admirable, in my opinion.
Kellan Grenier (21:33):
Yeah, I would totally second that. Coinbase is like the flag carrier right now, and setting the tone for the rest of the industry. And I salute them, and wish them all the luck in the world. Two quick ones that are top of mind, just because we were on a panel, actually, last week with them, the Home Base DAO team, and it's in the real world assets category, which is one that we care about a ton. Alex and Rodrigo, what they're doing is pretty interesting. They're looking at it more from the fractionalized side, and actually tokenizing real world homes, and putting them on chain, on Solana specifically, but they're doing great work, really talented team. And then, Tom at Credics. What Credics has done is really inspiring. They've been at it for a while now, really institutional friendly offering that can help onboard billions and billions of dollars into the ecosystem. So hats off to both of those teams. And there's infinitely more beyond that. And then, obviously, Parcl's development team, we think, is best in class.
Brian Friel (22:23):
Couldn't agree more. Home Base DAO was, actually, just on the podcast just before you guys, so shout out to them, Credics as well. I always see them building. I think we can all say, we're very lucky to have Coinbase representing our industry, and not giving up the good point. Trevor and Kellan, this has been an awesome conversation. Where can people go to learn more about Parcl?
Kellan Grenier (22:41):
You said it, Brian. Running a promotion for Phantom users, and launching that alongside this podcast, the first 500 new traders receive 10% discount on their first trade. There's a unique URL, be sure to use that. It's "Parcl," P-A-R-C-L, ".cc/phantom." And it's "Parcl" without an "E." So P-A-R-C-L.cc/phantom. That's the best place to go, because you'll get 10% off your first trade. Otherwise, just go to parcl.co, P-A-R-C-L.C-O, or follow us on Twitter, @Parcl.
Brian Friel (23:11):
That's awesome. Trevor and Kellan, the co-founders of Parcl, thank you so much for your time, for coming on The Zeitgeist.
Trevor Bacon (23:15):
Thanks a lot, Brian. Thanks for having us.
Kellan Grenier (23:17):
Thanks, Brian.