Irving Wladawsky-Berger

The Importance of Open Source Digital Wallets to the Future of the Internet

On September 13, the Linux Foundation (LF) announced its intent to form the Open Wallet Foundation (OWF) at its Open Source Summit Europe in Dublin. The OWF aims to develop open source software, key building blocks, and best practices that anyone can use as a starting point to build multi-platform, highly secure, privacy-protecting digital wallets. In addition, the OWF will advocate for the wide adoption of open source wallets that can be used to support a wide variety of applications, from payments to digital identities.

The LF was originally founded in 2000 as the Open Source Development Labs to help set the standards for the Linux operating system and support its continued development and commercial adoption. It grew over the years and assumed its current name, Linux Foundation, in 2007. Over the past decade, the LF has undergone a major expansion beyond its original Linux mission. It now has over 1,260 company members and supports hundreds of open source projects. Some of the projects are focused on technology horizontals, - e.g., AI, blockchain, security, cloud, - and others on industry verticals, including energy, automative, government, and health care.

Let me attempt to explain the importance of this announcement by addressing three key questions: what is a digital wallet?; what are digital identities?; and why do we need standard-based, open source digital wallets?

The 2022 State of AI in the Enterprise

“Rapidly transforming, but not fully transformed - this is our overarching conclusion on the market, based on the fourth edition of our State of AI in the Enterprise global survey,” said Becoming an AI-fueled organization, the fourth survey conducted by Deloitte since 2017 to assess the adoption of AI across enterprises. “Very few organizations can claim to be completely AI-fueled, but a significant and growing percentage are starting to display the behaviors that can get them there.”

AI is increasingly viewed by workers as a trusted assistant. “Within just the last 18 months, AI capabilities have advanced considerably, maturing from what was often experienced as a bothersome critic - telling workers what to do or pointing out their mistakes - to more frequently serving as a copilot, independently executing on insights and trends surfaced through the power and speed of cloud- based data hosting and computation.”

These conclusions are similar to those of Stanford’s 2022 AI Index report, which found that AI was becoming more affordable and higher performing, with lower training costs and faster training times across a number of AI tasks including recommendation engines, image classification, object detection, and language processing. This has led to the widespread commercial adoption and increased real-world impact of AI systems.

The Carnegie Cloud Governance Project

Two years ago, the Carnegie Endowment launched the Cloud Governance Project, a multi-year study on the governance challenges associated with cloud computing. “This project recognizes that the cloud offers huge benefits for individuals, organizations, and national economies through greater IT convenience, flexibility, and cost savings,” said the project’s website. “However, the risks of a major disruption affecting cloud services will invite regulation by governments at the local, national, and international levels. Moreover, as the world grows increasingly dependent on the cloud, other aspects of the technology – related to consumer protection, sustainability, inclusiveness, and human rights – will also attract scrutiny and regulation to protect or advance public interests.”

I’ve been closely following cloud computing since it first emerged in the late 2000s. In 2008 I gave a talk at a conference on The Promise and Reality of Cloud Computing. Most everyone at the conference agreed that something profound and exciting was going on, but there was no real consensus on what cloud computing was. A major reasons for both the excitement and lack of consensus about cloud is that we were basically seeing the emergence of a new model of computing in the IT world, only the third such model in the history of computing. The mainframe-based centralized computing model first appeared in the 1960s. Then came the PC-based client-server model in the 1980s. The more recent internet-based cloud computing model emerged in the late 2000s.

Over the past fifteen years, cloud has gone through three major stages. First came infrastructure-as-a-service, offering near unlimited scalability at very attractive prices. Then came software-as-a-service, offering a faster and less costly way of prototyping and deploying innovative applications leveraging advanced tools like containers, Kubernetes, and microservices. Cloud computing has now become a major engine of business transformation, helping companies adapt to the accelerated digitalization of the economy, especially since the advent of Covid-19 in March of 2020.

A Framework for Understanding the Power of Platforms

This past July, MIT’s Initiative on the Digital Economy held its 10th annual Platform Strategy Summit. The hybrid Summit included a number of panels and keynotes throughout the day, a few of which I attended online. In particular, I’d like to discuss the very interesting presentation by Boston University professor Marshall Van Allstyne as part of a panel on emerging trends in which he raised and answered five fundamental questions about platforms:

• Structure: Why do platforms have such high market caps but so few assets or employees?
• Strategy: Why does traditional product strategy fail in platform markets?
• Regulation: Why does traditional antitrust fail in platform markets?
• Fake News: Why is misinformation such a hard problem?
• Can Decentralized Autonomous Organizations dethrone platforms?

In his presentation, Van Alstyne, aimed to articulate a single framework that will help answer all five questions, that is, a consistent way of thinking about platforms based on the research that he and his colleagues have been conducting over the past decade. Let me summarize Van Alstyne’s presentation by first describing his unifying framework, followed by how the framework applies to each of the five key questions.

Web3: The Promise of a Blockchain-Based Internet of Value

On June 30, MIT hosted the Imagination in Action Web3 Summit, an event jointly organized by MIT Connection Science, Forbes, and Link Ventures. The Summit brought together almost 600 developers, entrepreneurs, investors, and academics to discuss the present state and potential evolution of Web3. The agenda featured a number of panels and talks. Speakers included Alex (Sandy) Pentland, - MIT professor and Connection Science Director, Michael Federle, - CEO of Forbes, John Werner, - Managing Director at Link Ventures, and Esther Dyson, - investor, journalist, and philanthropist.

The MIT Summit is the first in a series of Imagination in Action conferences. The next one will take place on October 6 in San Francisco, followed by one on January 17 at Davos, and back to MIT in June of 2023. The summits aim “to take us from reflections on the last major social and economic transformation precipitated by the arrival of the Internet era, to the economics to build and the governance to sustain Web3,” as well as to envision the possibilities of a Web3 future and to try to discern hype from reality in these early days of a potential new internet era.

I wasn’t able to attend the Summit in person, but I watched the recordings of a number of the sessions, where I heard a variety of opinions on what Web3 is about. This is not surprising. In their early years, major new technologies are generally accompanied by a mixture of excitement, speculation and confusion, as people sort out what the technology might be about and how it’s likely to evolve. Something important is going on out there, but it takes time and marketplace experience to sort things out.

I’ve seen this play out a few times throughout my long career in the IT industry, especially in the early 1990s as the internet was transitioning from a DARPA-sponsored project in the research community to an initiative that was starting to take the broader marketplace by storm. A lot was happening around the internet, but it wasn’t at all clear where things were heading, and in particular what the implications would be to the world of business. Let me share some of the lessons learned in the 1990s while formulating IBM’s internet strategy in our newly formed Internet Division.