Parcl is a real estate perps platform on Solana. It’s an interesting concept exploring the crossover between RWAs and prediction markets. It has one of the most hyped points programs around right now, and the PRCL token was recently confirmed to be coming in April.

Parcl pts priced at .0025 on whales

– 4 pts per $ supplied daily
– 4 * .0025 = .01
– 1% daily return
– 5% boost if you use a referral
– 365 * 1.05% = 383.25% APR (pts dont compound)

Great return all things considered -> effectively 2x’s your stables in the last 3 months

Also… pic.twitter.com/Topzsr3kMv

— jay (@0xjaypeg) February 27, 2024

It looks likely PRCL will launch with a pretty high val, and the market looks great right now. Parcl docs are very light, but I have several concerns with it so far.

There are currently only 10 active markets on Parcl. There is little clarity on how long each market is live for, or the intervals in which new markets are onboarded/rotated. Old markets and non trading markets can be seen in the dashboard.

The LP style feels similar to Synthetix perps: it’s a monolithic pool with an aggressive velocity-based funding rate system that keeps OI fairly balanced across all markets.

The benefit to this is it creates a viable habitat for LP capital, a crucial early step for an ambitious project like this. The drawback is that it severely handicaps the ability of traders to express an opinion. With such a reactive funding rates, the open interest cap is effectively +/- 3% from the balanced book, as funding rates would be far too prohibitive to leave a trade open beyond this range. Miami Beach and Austin have two of the more imbalanced markets on Parcl at the moment, with 1D funding rates of 0.0421% and 0.1885% (15%/69% APY) respectively.

Just bought a $250k house in Chicago

And shorted Chicago ~$250k on @Parcl the moment the ink hit the paper

My wife gets a house, I get to be 100% delta-neutral

All while farming the greatest airdrop of our generation (use code “LUKE” for a 5% bonus points) pic.twitter.com/SpK62dTv9p

— Luke Cannon 🧙🏽‍♂️ 🤙 (@lukecannon727) February 26, 2024

The tweet above sounds great in theory, and is what lot of people envision when they think of DeFi and its potential. But in Parcl’s current state, this is a fluff tweet. Parcl is not yet viable in this way. The level of detail is fixed at the city level, so Luke’s trade is only a partial hedge at best. Holding the trade open for an extended period of time could be extremely costly due to funding. In fact, the more effective/necessary of a hedge the trade is, the less viable Parcl likely becomes.

Trading on Parcl is thus geared more towards funding rate arbitrage than expressing a thesis. To take the nest step, Parcl need to figure out how to scale markets and lower funding costs. More trading methods such as forwards or swaps would be ideal. Maybe segregating the LP pool or allowing isolated LP pools to sit on top of the base pool could help.

Solana’s UX is great, but it is lagging behind in things to do beyond trading and basic DeFi. Parcl has a clear path to short term success as a degen speculative casino type venue and something else to do on Solana. But it must continue to evolve in order to become a legitimate financial tool and live up to the hype.