RChain, a blockchain project that promoted a cooperative approach to platform building, is apparently in financial difficulty after prominent backers began to question the financial management of the project. RChain is not the first project to be suffering from financial difficulties, following the decision by Steemit to slash 70% of their workforce last month and Bitmain encountering IPO issues this week, but hopes were high through 2017 and into 2018 that RChain could compete with Ethereum and other top dApp platforms. That assertion seems to be in tatters now following allegations of poor acquisitions, backroom deals, and terminated partnerships.
Sing When You’re Winning
RChain’s problems began when they licensed a piece of audio software from Immersion Networks, which allows users to rent songs through the RSong app, for five years at a cost of $23.5 million. Not only does RChain still owe liabilities of $15.5 million on this deal, it represents over 75% of the $31 million raised at ICO. Investors claim they only found out about the true cost of the software two months after the deal, having already raised doubts about its relevance to the project. They also claimed the decision was made without their input, which was something they were told would be a part of the decision-making strategy.
Despite CEO Greg Meredith saying that the RSong app has the potential to be “immediately profitable”, he also admitted that he is looking to defer the final payment on the deal, with Immersion Networks seemingly in a position to wind up RChain should they so wish.
Problems Running Deeper
The problems seem to run a little deeper than software licensing issues; development lead Medha Parlikar and two board members all left RChain in October, while CFO Kate Gonsalves resigned on December 7. A balance sheet in the minus and an estimated $5 million tax bill may be indicative of these deeper issues. RChain’s current holdings of over 480m million RHOC tokens is worth $16,320,000, but in the current market they couldn’t possibly hope to realize that value, making them worth far less.
Further issues were highlighted when it was revealed in October that Pithia, a VC partner, had exercised an unpublicized clause in their contract. This revealed that they could terminate their agreement with RChain if the platform was launched after March 31, 2019, but still keep the 105 million RHOC tokens that RChain lent them. This clause was exercised when the release date was put back by one day to April 1, 2019, perhaps demonstrating Pithia’s desire to have nothing more to do with RChain. This unusual clause has been criticized as “crazy” and of making “no sense” by investors.
$rhoc, running out of money, great project but completely mismanaged.
— CryptoTrader1977 (@Crypto1977) December 12, 2018
Rchain seems to have problems mounting up, and without the likelihood of price increases to take investors’ minds off the troubles, it remains to be seen how much longer they will put up with the perceived malpractice before they push for drastic action.