Co-authored by Peter Tobey, Marketing and Communications Director at IPv4.Global and Leo Vegoda.

An IP address is a unique identifier for a device on a network, including the internet. IP stands for Internet Protocol (IP) which is a set of rules (a protocol) for addressing and routing data so it can travel through networks and arrive at its intended destination. Hence, “address.” Internet-connected devices such as computers and smartphones each have a unique IP address.

IP & Education

In its early development, the internet was thought to be an experiment with reasonable but not unlimited potential. The design of the IP version used in the 1990s—the version still most widely used today—included 4.3 billion addresses, which seemed to be plenty. Of course, there are many, many more devices in use today, and they require addresses.

Adding to the shortage of IPv4 addresses is the current imbalance in IP distribution. In the 1990s, the Internet was thought primarily to be a research and educational tool. As a result, colleges and universities were allocated very large numbers of addresses. Overloading educational institutions also occurred due to the early design of the sizes of distribution lots.

Today, many institutions have 65,000 or more IPv4 addresses and use a small fraction of them. The surplus is currently valued at approximately $50 each on open markets. So, the holders of these addresses are selling the rights to them to finance current needs and long-term projects.

Ownership

Individual IP addresses aren’t actually “owned.” Instead, possession includes the right to a unique registration of each address in directories of addresses worldwide. It’s those directories that control data routing. “Ownership” amounts to the right to use that unique address and to receive data addressed to it. Those rights are currently bought and sold on marketplaces like IPv4.GLOBAL’s auctions.

The Technology

What IP Addresses Do

Data traveling the Internet is divided into pieces, called packets. IP information is attached to each packet so that each can arrive in the right place. So, almost every location (a device or domain) that connects to the Internet is assigned an IP address.

How They Are Routed

Data packets travel from one machine to another, directed by routers. These read the IP information in each packet and interpret it to send that packet one step closer to its destination. The system relies on each router, including a table of information that correctly determines the next closer route to a packet’s destination.

A Brief History

The first major version of IP, Internet Protocol Version 4 (IPv4) is still the dominant protocol of the Internet. A key benefit of IPv4 is its ease of deployment and its widespread use. It can be assumed to be ubiquitous as almost no one can fail to support it. A drawback of IPv4 is the limited number of addresses it can define.

There aren’t enough IPv4 addresses available for all the devices attached to the internet. Its successor, one that defines more address space, is Internet Protocol Version 6 (IPv6), introduced in 2006.

The Hidden Financial Value

Price History

Due to its design, IPv4 allows for (only) 4,294,967,296 unique addresses. At the time of the protocol’s creation, this appeared to be enough for the indefinite future.

The early internet was managed based on that assumption. Organizations with networks had to apply for IP addresses, but they were free and readily available. In fact, in the 1980s, a business would simply ask for those addresses that it needed. They were simply assigned. In the 1990s and 2000s, a business could get addresses from the Regional Internet Registries. These IP managers had community-developed policies that defined the requirements for getting a block of the ever-shrinking pool of available addresses.

But by 2010, the Internet was exploding with new devices—iPhones, smart watches, smart TVs, and even refrigerators with Internet capabilities. At the same time, some parts of the world with little connectivity developed lots of it. Rapid growth in Asia, Latin America, and Africa brought the internet to a billion people.

All these devices required unique IP addresses. As a result, the supply of IPv4 addresses has become insufficient to describe the location of all the machines on it. IPv6 (a newer version) was created to deal with this problem. But the two protocols aren’t perfectly compatible, and so those with established IPv4 networks have sought additional addresses.

This has created marketplaces where those with a surplus of addresses can “sell” or lease them to others. Some growing organizations need more of them, and new ones may prefer them. So, those with a surplus can sell or rent any IPv4 addresses they no longer need. The demand side of this equation has been growing quickly.

The demand for IPv4 addresses has increased dramatically in the past two years. Single addresses that exchanged hands for $20 in 2019 were available for as much as $60 in 2021.

Auction Sites

Millions of IPv4 addresses are exchanged every year. In 2021, a total of 36,000,000 were traded. They are bought and sold in lots ranging in size from 256 to 4,194,304 addresses. The exchange of these addresses involves a number of steps to maintain their singularity of ownership and use. What’s more, markets for the private and public sale and lease of these assets have been developed.

Online auction sites and exchange services for IPv4 addresses can assist buyers and sellers who wish to maintain some privacy in the process.