Factors that Affect IPv4 Address Pricing

When the Internet first emerged, IPv4 addresses were plentiful and readily available for everyone to use. But, in 2023, these once-abundant resources are almost a rarity. The level of scarcity has led to increasing prices. Let's explore the factors that influence the pricing of IPv4 addresses to shed light on why they have become so valuable.

A Brief History of IPv4 and the Development of IPv6

IPv4, introduced in the early 1980s, originally offered a vast pool of 4,294,967,296 unique addresses. At that time, this seemed more than sufficient for Internet connectivity. But the rapid growth of the World Wide Web has used up this once big space. The slow adoption of IPv6 has prolonged the problem.

While IPv6 offers abundant addresses, its adoption has been slower than expected, with only a fraction of users utilizing it globally. Techniques like Network Address Translation (NAT) and subnetting have helped extend the life of IPv4. But the tech world knows this is not sustainable in the long run.

Despite efforts to prolong its use, the scarcity of IPv4 addresses has driven prices skyward. Once available for as little as $5 to $10, IPv4 addresses are now selling for as much as $60 each.

There are some companies that own large blocks of IPv4 addresses that they don't need. Approximately 20% of global IPv4 resources remain unused. It's unclear how much of these unused space is dedicated for special use (like research) and how much is available for trading in the market. The only certain thing is that IP addresses are rare and that various factors can affect their pricing.

Factors Influencing IPv4 Pricing

Two key factors primarily dictate the price of IPv4 addresses.

1. The Imbalance Between Supply and Demand. The demand for IPv4 addresses has consistently outstripped their supply. In April 2022, there were more Internet users than available IPv4 addresses, creating a supply-demand mismatch.

2. Slow IPv6 Adoption. Despite being superior in its technical capacity (and, more importantly, it is so abundant), IPv6 adoption has been sluggish. This leaves IPv4 as the dominant protocol. This slow transition has further driven up the value of IPv4 addresses.

The Rise of IPv4 Auctions

One way that you can meet your need for these rare IPv4 addresses is through IPv4 auctions. These auctions provide organizations with the opportunity to buy blocks of IPv4 addresses. Within these auctions are different block sizes that meet specific needs.

Cost savings and potential profits are the reasons why you may want to participate in these auctions.

The process of an IPv4 auction can be facilitated by an IP address broker with the participation of a regional Internet registry (RIR). Here are the steps involved:

1. Meeting Requirements: Organizations must meet conditions set by registries. Unless you meet these requirements, an IPv4 block will not be granted to you. These requirements typically include an RIR approval, the demonstration of the need for IP addresses, and partnering with reputable registration services.

1. Deposit and Rules: After meeting the criteria, participants pay the required deposit and review the auction rules.

1. Bidding: Participants can place bids on their desired IP addresses and adjust them according to how the auction goes.

1. Payment and Transfer: Once an agreement on costs is reached, the payment process begins. After which, you will be granted the transfer and database updates for the won addresses.

An Alternative to IP Address Auction

IP leasing is an alternative to permanent IP ownership. Its main benefits are flexibility and cost-efficiency: IP leasing allows businesses to use IP addresses for a specific period without having to pay huge upfront fees for ownership.

IPv4 leasing has become a popular approach because it allows companies with unused IP resources to monetize them while helping others meet their needs.

Closing Thoughts

IPv4 auctions provide organizations with a means to acquire these valuable addresses. Purchasing offers potential cost savings and investment opportunities if you need IPv4 long-term. However, IPv4 leasing can be a good choice for your business if the costs of an outright purchase is steep or ownership is not really what you are looking for.