What Do You Know About IP Addresses and its Scarcity-Driven Second-Hand Market?

IP address is an essential part of the Internet; first developed in 1974, its importance for businesses grows together with its depleting supply

Contrary to physical addresses, the supply of unique IP addresses currently in use is limited, creating new markets for savvy IT infrastructure businesses. To understand what is the IP address market and how it works, a basic understanding of IP address history and working principles is needed.

In essence, an IP address is a numeric sequence attached to a device. The sequence mirrors the usage of physical addresses that mark buildings: if a piece of standard mail needs an address to be delivered to, the digital packets sent through a network need IP addresses for the same reason. Currently, two generations of IP addresses, IPv4 and IPv6, are being used universally.

An overview of how both protocols evolved in time will help understanding the current state of the IP address market.

The Internet Protocol addressing system (IPv4) was first developed in 1974, creating 4.3 billion IPv4 addresses. At the time, it was hard to predict this number would become too meager to meet the needs of global connectivity.

As the development of the Internet gained traction, a need for independent bodies to govern the IP address ecosystem arose, and RIPE, the first Regional Internet Registry (RIR), was established in 1992 to oversee the European network. Other continents followed suit, and the latest RIR to be set up, AfriNIC, was formed in 2005.

Initially, each region had a pool of IPv4 addresses they allocated for free to the networks in need. However, the free supply of IPv4 addresses has run out for all RIRs save AfriNIC, and the only way to obtain an IP address now is to lease it from a third party organization with a pool of spare addresses. The North American RIR, ARIN, was the last one to exhaust its supplies in 2015, kickstarting the second-hand market of IPv4s, and creating opportunities for companies specializing in leasing IPv4 addresses such as Heficed.

“The need of reliable IPv4 suppliers is high and will remain so in the foreseeable future,“ commented Vincentas Grinius, CEO of Heficed, a company leasing IPv4 addresses. „The IPv4 address pools of most RIRs are exhausted precisely at the time when the need for IPv4 addresses is at an all-time high. With global migration to IPv6 pending, the number of internet users globally increasing, and companies offering Virtual Private Network, Voice over IP, or business intelligence services expanding their capabilities, IPv4 business sector is facing as many challenges as opportunities. For companies like Heficed, the main challenges would be fighting fraudulent practices and maintaining a steady supply of reliable IP addresses.”

When the Internet started spreading as fast as it did during the 1990s, it became evident that 4.3 billion IPv4 addresses would not last. As a result, a new protocol, IPv6, was first introduced in 1998. The main benefit of IPv6, when compared to the predecessor IPv4, is its virtual inexhaustibility: within the IPv6 system, 340 trillion, trillion, trillion unique addresses could be created. Nonetheless, the global migration to IPv6 is slow, and Internet Service Providers (ISPs) have to simultaneously upkeep both the IPv4 and the IPv6 networks, as devices using different protocols can‘t communicate. The ISPs globally do not seem to be in a rush to completely shift to IPv6.

As long as there is no genuinely global push to switch to IPv6, the scarcity of IPv4 addresses will keep driving the second-hand IP address market. As with many systems set up in the early days of global connectivity, the IPv4 can’t meet the growing infrastructural demands for much longer. In the meantime, new niches are open for IP address-oriented companies to thrive in.