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How IPv4 address markets formed?

  • Posted at 2022-03-31 16:45:37
  • By Prefixx Team

How IPv4 address markets formed?

In 2021, there was a significant development that took place in the IPv4 address market. The prices for IPv4 addresses have doubled from $27 at the end of 2020 to $55 by the end of 2021. What explains this sudden increase in the price? We take a look at the factors that have led to this development.

IPv4 is depleted

During the 80s, IP addresses were available to anyone who wanted them. At that time, the internet was essentially an experiment in packet-switched networking with a short-term focus. The practices for IP management followed did not keep in mind any future long-term vision.

Things changed in the 90s as the internet fast grew in popularity. There were three areas where pressure was felt – IP addresses, names, and routing. No one had expected this kind of scaling up of DNS to happen, which is the root cause of today’s problems. 

In 1993, the number of routed address prefixes was 20,000. It is now 1.1 million. The routing protocols have not changed and neither have the costs of operating the system for routing. The hierarchies followed and the network tiers ensured scaling happened without affecting costs.

IPv4 is formed by an address space that is 32 bits long. It is fixed and is hence finite. To solve this problem, the IETF took the easy route of expanding it with 128-bit fields. This did not address the core problem.

In 2007, when the iPhone was released, all hopes of the IPv4 crunch being released were dashed. In 2009, it was apparent that the existing IPv4 address pool would not last. In 2011, the depletion of IPv4 commenced. IPv6 has still not become a reality. The need to have access to IPv4 addresses is still strong. 

IPv4 markets

This ongoing need can be fulfilled only by market operation. The market had a secondary function of redistribution where they met new needs by releasing addresses that had already been allocated. It was not an ideal solution.

It went against the basic tenets of the IP address. Members of the community opposed forming a market for IP addresses. Their view was that IP addresses need to evolve into a stable commodity. The addresses should be enablers and not become a bottleneck that is subject to speculation. 

They argued that IP addresses were essentially not valuable nor were they properties by themselves. While this argument is theoretically sound, it doesn’t work well when demand is rising and supply is fixed. Price pressure automatically occurs due to the bottlenecks in the IP address supply.

The rise of IPv4 markets was thus unavoidable. The problem is that due to complacency not much focus was given to IPv6 deployment. As a result, the crunch in IPv4 addresses, as well as the subsequent price rise, were expected. This led to the growth of a secondary market where IPv4 addresses were redistributed.
Leasing and buying IPv4

A question arises over how IPv4 can be obtained. It is whether someone who needs an IPv4 address should buy it outright from someone who owns an address that already exists or lease it. A timed lease would allow the IPv4 address to be used for a particular period after which it is returned to the owner.

The price of a product would increase when the market perceives that the product is in limited supply and the demand for it is increasing. The value of the product would thus increase for the owner of the product not for the lessee.

When the buyer opines that the lifespan of the market is short and the demand will come down, leasing makes sense. 

At present, IPv4 addresses have a value because of the drastic increase in demand with supply being finite. The deployment of IPv6 and the dominance of IPv6 will cause the IPv4 market to collapse. Until IPv4 has no value, its market will continue to boom.

Prefixx IPv4 Broker

If you are looking to buy IPv4 addresses, you can get them from a registered IPv4 broker like Prefixx. The Prefixx team helps network admins find resources and simplifies the process of acquisition. With their 12+ years of experience and an extensive partner network, you can be assured of a continuous supply of IPv4 addresses. You can contact them to find out how to get IPv4 addresses. 

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