The Hidden Value of IPv4 Addresses

In any network, each location has a unique identifier so it can be found in a crowd. Homes have addresses, U.S. citizens have Social Security numbers, and towns have zip codes. When the internet was being designed, each node on the planned network needed a unique identifier, too. So, a numbering scheme was developed. That system, known as the Internet Protocol (IP), defines how network devices are described.

This system is a set of rules (a protocol) for addressing and routing data so it can travel across networks and arrive at its intended destination. Each internet-connected device, such as a computer or a smartphone, has a unique IP address. The numbering system established at that time, IPv4 (Internet Protocol version four), is familiar to most people and looks like this: 54.175.145.103

IP and Education

In its early days, the internet was thought to be an experiment with terrific but not unlimited potential. The design of the IP numbering system—the version still most widely used today—includes 4.3 billion addresses. (Slightly fewer than 4 billion can be used on most devices.) In the 1990s, this seemed like plenty.

Colleges and universities were among the earliest recipients of IP address space. Often, they got many more IP addresses than they could ever use. There are several reasons for this. First, there were a lot of numbers, and each was created at no cost. There appeared to be more than enough numbers for everyone. Second, the technology available at the time only allowed three network sizes: small (256 addresses), large (65,000 addresses), and massive (16 million addresses). So, many organizations were given large or massive amounts of address space because the next smaller batch was too small. A great deal of IP address space remains unused simply because too many addresses were distributed to some networks.

Of course, when you have a finite supply of something, and the supply is distributed in large batches, you eventually run out. By 2010, internet connectivity was spreading from computers to phones, refrigerators, watches, and televisions. It was already everywhere. So, the language used to identify these connected things ran out of names. An entirely new language (IPv6) was created to supplement the old one (IPv4). But old languages die hard. The result is a long-term trend of rising prices for those who want to use the old system.

Adding to the shortage of IPv4 addresses is the current imbalance of IP distribution to schools. In the 1990s, the internet was primarily a research and educational tool. As a result, colleges and universities were allocated very large numbers of addresses. Many remain unused.

Today, many educational 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, amounting to millions of dollars in unused assets. So, some of the holders of these addresses are selling the rights to them to finance current needs and long-term projects.

Transferable for Payment

Individual IP addresses are unique identifiers, most often associated with a specific device but not always. While they are used one at a time, they are transferred in "blocks" of sometimes many IP addresses. Possession of a block includes unique registrations of addresses in registries worldwide. These registries maintain uniqueness in the sense that they make sure it's clear who is the authorized user of a block of IP addresses. Registration includes the ability to transfer IP address use to someone else in return for payment. 

Tech Basics

What IP Addresses Do

Data on the internet is divided into pieces, called packets. IP information (the destination address) is attached to each packet so that each one arrives in the right place. So, almost every location (a device or domain) that connects to the internet is assigned an IP address.

How Data Is Routed

Data packets travel from one machine to another. This travel is directed by routers. Routers read the IP information in each packet and interpret it to send it one step closer to its destination. The system relies on each router including a table of information that correctly determines the next closest stepping-stone to a packet's destination.

Why IPv4 Persists

IPv4 is still the dominant internet protocol. A key benefit of IPv4 is its ease of deployment and widespread use. Because IPv4 is used so broadly, network administrators and other internet developers can assume it is everywhere because everyone is compelled to support it. That's how widespread it is.

The Hidden Value

Price History

As outlined above, at the dawn of the internet, organizations with networks had to apply for IP addresses, but they were free and readily available. In fact, in the 1980s, a business simply asked for the addresses it needed, and the numbers were assigned to the requestor. In the 1990s and 2000s, a company could get addresses from a regional internet registry. These IP managers had community-developed policies that defined the requirements for getting a block of the shrinking pool of available addresses. Still, IP addresses remained free and available.

But by 2010, the internet device population was exploding. At the same time, some parts of the world that previously had little internet connectivity developed a lot of it. Rapid growth in Asia, Latin America, and Africa brought the number of internet users to one billion.^Footnote1 All of these users' devices required unique IP addresses. As a result, the number of IPv4 addresses became insufficient to describe the location of all the machines on the internet. IPv6 was created to deal with this problem. But the two protocols aren't perfectly compatible, so those with established IPv4 networks have sought additional addresses when they need to grow their networks.

This has created marketplaces where those with a surplus of IPv4 addresses can sell the rights to them or lease them to others (e.g., a growing organization that needs more addresses or a new entity that prefers the older IP system for the reasons mentioned above). So, those with a surplus of IPv4 addresses can sell or rent the addresses they no longer need. The demand for IPv4 addresses has increased dramatically in the past two years. Single addresses that exchanged hands for $20 in 2019 are available for as much as $60 in 2022 (see figure 1).

 

What We Do

In 2021, a total of 36,000,000 IPv4 addresses were traded, and in 2022, the transfer rate is already higher. These addresses are bought and sold in lots ranging in size from 256 to 4,194,304. In response, markets for the private and public sale and lease of these assets have been developed.

IPv4.Global is the leading online auction site and exchange service for IPv4 addresses worldwide. We consult with and assist buyers and sellers who wish to maintain some privacy in the process. We also host the largest, most transparent online auction site for these addresses.

Note

1. Max Roser, Hannah Ritchie, and Esteban Ortiz-Ospina, "Internet," OurWorldInData.org, 2015. Jump back to footnote 1 in the text.↩

Hank Weiss is an Account Executive at IPv4.Global.

Charles Abramson is an Account Executive at IPv4.Global.