Cryptocurrency vs. IPv4 Addresses: Comparing Two New Revenue Opportunities
This comprehensive article compares cryptocurrency and IPv4 addresses from the perspectives of history, market liquidity and new business opportunities.
Functional IP addresses were introduced four decades ago, while cryptocurrency has only recently celebrated its first decade. Regardless, when we compare cryptocurrency vs. IPv4, both have become desirable commodities that now offer unique opportunities to earn revenue.
In this cryptocurrency vs. IPv4 addresses discussion, we review how these commodities have emerged, evolved and shifted in the landscape of today’s internet. Can both offer stable revenue streams? Is one a better investment than another?
Let’s dive deep into the worlds of crypto and IP addresses and discover how these two new commodities compare.
What is cryptocurrency?
Cryptocurrency is a digital currency that is based on blockchain technology. Blockchain is a ledger or, in short, a database of records of all crypto transactions.
The concept of cryptocurrency was developed by David Chaum in 1982 and later by Wei Dai in 1998. However, it was Satoshi Nakamoto – a pseudonym of the anonymous creator(s) – who created the first cryptocurrency, along with blockchain, in 2008.
With the help of blockchain, a decentralized network of computers authenticates crypto transactions. Groups of these transactions are known as blocks, and they are added to the system to keep it running. The ledger is public, and anyone can access information about the transactions made.
Those who provide computer power to facilitate the consuming process of crypto mining – when new crypto is added to the system and transactions are validated – earn crypto as a reward. To perform cryptocurrency transactions, public and private keys are used. The latter are stored in crypto wallets.
Cryptocurrency vs. fiat currency
Although cryptocurrency is comparable to traditional (fiat) currencies, in the sense that you can use it to purchase goods, there are a few key differences between the two.
|No dependency on banks||Dependency on banks|
|Fewer additional fees||Fees for services|
|Extreme price volatility||Inflation & deflation is more predictable|
|Less stable & not always transparent||More stable & transparent|
|Unprotected on a government-level||Protected on a government-level|
|Greater risk of digital theft||Greater risk of physical theft|
|Not accepted globally||Accepted globally|
|People find cryptocurrencies confusing||People are used to traditional currencies|
A decade ago, cryptocurrencies were quite useless. At least when comparing them to traditional currencies. Today, you can buy food, home goods, cars and plane tickets using crypto. Some healthcare institutions even accept crypto as payment for coronavirus tests.
By mid-summer of 2021, there were over 220 million crypto users worldwide. How significant is this number? According to CoinDesk, in February 2021, there were only 106 million users worldwide. Evidently, crypto is gaining momentum fast.
What are IP addresses?
IP addresses, or Internet Protocol addresses, are numeric or alphanumeric strings that identify devices on the internet. In this sense, both IPs and cryptocurrency are the same, as they are, literally, represented by codes made up of bits.
IPs emerged with the TCP/IP communication protocols suite, created and implemented by Robert Kahn and Vinton Cerf between 1973 and 1975. DARPA (Defense Advanced Research Projects Agency) introduced Internet Protocol version 4 (IPv4) back in 1981. Although, as the name suggests, this is the fourth version of the Internet Protocol, it is the first to move from testing stages to full use.
In 1995, IPv6 surfaced as the more advanced version of the Internet Protocol, and, to this day, it is the only other version, besides IPv4, to be in use. That said, although IPv6 offers many great advantages over IPv4, the latter remains the backbone of the internet.
IPv4 and IPv6 are both crucial, and the internet, as we know it today, wouldn’t exist without the two. Of course, at the moment, IPv4 addresses are still much more important in the internet’s architecture, which is why it only makes sense that IPv4 has become a commodity.
The history and management of cryptocurrency
Bitcoin (BTC) was the first cryptocurrency to emerge in the crypto world. Even today, it is the biggest and, perhaps, most stable cryptocurrency in the game. After Satoshi Nakamoto first introduced Bitcoin in 2009, it took several years for rivalry cryptos to follow suit.
In 2011, Litecoin (LTC), Namecoin (NMC) and Swiftcoin (SWIFT) joined Bitcoin. Litecoin is still relatively popular today, and it ranks #18 by market capitalization. Here is a list of all cryptocurrencies by rank. The following are the closest competitors of Bitcoin in December 2021:
- #2 Ethereum (ETH)
- #3 Binance Coin (BNB)
- #4 Tether (USDT)
- #5 Solana (SOL)
- #6 Cardano (ADA)
- #7 USD Coin (USDC)
- #8 XRP (XRP)
- #9 Polkadot (DOT)
- #10 Avalanche (AVAX)
As more people were interested in cryptocurrency and the demand for this mysterious resource grew, more cryptocurrencies emerged. In December 2021, there were over 8,000 official cryptocurrencies, with KALA ranking last at #8,265.
With so many different cryptos in existence, it may come as no surprise that there’s no single body that regulates all of them. When someone joins the crypto world, they automatically accept the nature of decentralized infrastructure, integral to the blockchain network. Needless to say, with so many parties involved and no centralized control, changing network rules can be excruciatingly difficult.
Types of blockchain networks
A blockchain network is an infrastructure in which cryptocurrency is tracked and traded. There are four types of blockchain networks:
- Public blockchain
- Private blockchain
- Semi-private blockchain
- Consortium blockchain
A public blockchain is completely decentralized, and anyone can join it. Bitcoin and Etehreum, for example, are based on a public blockchain. A private blockchain, on the other hand, is controlled by a single entity and is partially decentralized with restricted access.
Semi-private and consortium blockchains exist to minimize the cons of public and private blockchains, which include long data validation times and security vulnerabilities.
A semi-private blockchain, also known as a hybrid blockchain, is controlled by a single entity but offers public access. However, several entities control a consortium blockchain. Just like private blockchains, consortium blockchains are only partially decentralized.
The history and management of IP addresses
Contrary to cryptocurrency, there aren’t 8,000 different types of IP addresses. The management of this resource is also much more centralized. This all comes down to the creation of IPv4.
In 1962, J.C.R. Licklider came up with the concept of an Intergalactic Network. In 1969, ARPA (later renamed DARPA) funded the creation of ARPANET. As we discussed already, in 1973, Khan and Cerf developed the TCP/IP protocols. Eventually, the experimental IP versions 1, 2 and 3 gave way for internet architects to finally develop IPv4 in 1981.
At first, Jon Postel was responsible for managing all IP addresses. His work led to the creation of the Internet Assigned Numbers Authority (IANA) in 1988, which currently coordinates all internet number resources, including IP addresses and autonomous system numbers (ASNs).
Up until the early 90s, anyone could get IPv4 addresses. Unfortunately, this led to a relatively unfair allocation of resources, the consequences of which we deal with even today.
Right from the start, there were exactly 4,294,967,296 IPv4 addresses, around 590 million of which are reserved for various uses. 4.29 billion might seem like a significant number. However, if you consider the number of internet users and internet-connected devices they use, it is clear that this is an extremely limited number.
IPv4 exhaustion is one of the driving forces behind the development of IPv6. This Internet Protocol version is superior in many ways, but its adoption is extremely complicated and uncertain. At this point, it is impossible to predict when IPv6 adoption will reach a stage at which IPv4 moves to the side. Internet experts agree that this isn’t happening soon.
As Regional Internet Registries (RIRs) emerged between 1992 and 2004, the allocation of IPv4 addresses became more orderly. Once IANA depleted its free address space, RIRs continued allocating the resources they had regionally. Eventually, most of them ran out of IPs too. AFRINIC, at the moment, is the only RIR that still can allocate unused IPv4 addresses.
RIRs do not distribute IPs to end-users directly. In most cases, internet service providers (ISPs) are responsible for that. An ISP often has a Local Internet Registry (LIR) status. Each RIR may also work with a National Internet Registry (NIR) in their respective service regions.
As already mentioned, the cryptocurrency market deals with extreme price volatility. That means that the prices of cryptocurrency fluctuate in drastic and usually unpredictable ways. This is one of the reasons why the crypto market is considered to be highly unstable.
We can look at the price history of Bitcoin to see how extreme the fluctuations in prices can be.
Bitcoin price history
According to Statista’s data, Bitcoin prices were rising steadily up until 2018. In October 2013, 1 BTC was worth $196. The price rose to $13,062 by December 2017. Although Bitcoin prices were always changing, and both raises and dips existed, in 2018, the prices started jumping much more extremely.
In January 2019, the price per BTC fell to $3,441. Then it rose again to $12,024 in June of that same year. These kinds of jumps, however, have nothing on what’s been happening since September 2020. In just six months, the price per BTC rose to $58,734. Then it fell to $35,945 in May 2021. It continued dipping and rising until the all-time high of $67,553 per BTC in November 2021. Since then, the prices have been declining once again.
Without a doubt, the Bitcoin market is quite unpredictable, and investing in it can be a little bit of a crapshoot. Of course, those who manage to purchase and sell BTC at the right time can see a great return on investment. Nonetheless, that is often seen as a gamble.
Cryptocurrency as a revenue stream
As cryptocurrency becomes more and more accessible, people are more and more interested in investing in this new commodity. But can cryptocurrency offer a stable revenue stream?
Ultimately, if you invest in cryptocurrency, the only way to get a return on this investment is to sell the resource at a higher price. Whether or not you can sell it at a higher price depends on the unpredictable market and whether or not you will find a buyer.
Let’s look at the pros and cons of investing in cryptocurrency and turning it into a revenue stream.
|A commodity worth investing in||Not all investors trust cryptocurrency|
|Many cryptocurrencies to choose from||Too much choice creates market instability|
|Crypto is becoming more acceptable globally||Illegal in some countries|
|Anyone can invest in cryptocurrency||Price changes are extreme|
|Cannot yet replace traditional fiat currencies|
|Vulnerable to cybercrime|
|Does not offer a steady revenue stream|
Cryptocurrency and the finite supply
Currently, there are close to 19 million BTC in circulation. This sounds impressive. Also, quite alarming, knowing that there are only 21 million BTC in total. What happens once the Bitcoin supply dries out? Well, according to calculated predictions, this will not happen until 2140. Once BTC is exhausted, this cryptocurrency is likely to remain a desirable trading commodity.
Perhaps the limited supply is one of the reasons why Bitcoin prices have been changing drastically in the past few years. It is only logical that a scarce supply garners a higher demand. However, this is not true for every cryptocurrency. Ethereum, for example, does not have a limited supply, yet it ranks #2 by market capitalization.
Currently, there are close to 118 million ETH in circulation. However, the yearly supply of this cryptocurrency is limited to 18 million. This kind of limitation may incentivize to buy ETH while it’s still available on the market that year, even when the supply is not capped overall.
What happens when there’s too much crypto in circulation? To stabilize the supply, the coin burn is performed. In short, coin burning is a method to stabilize inflation by sending cryptocurrency coins to a burn address, where no one can use them. Ethereum, for example, has burned $3.8 billion worth of ETH to date.
Cryptocurrency is, in one way or another, illegal in 10 countries worldwide, including Algeria, Bangladesh, China, Ecuador, Egypt, Nepal, North Macedonia, Russia, Turkey and Vietnam. The governments of these countries deemed crypto trading and/or mining to be illegal activities.
Even where cryptocurrency is not outright banned, it is not accepted as an official currency. In fact, El Salvador is the only country in the world to have given Bitcoin legal tender status and adopted this cryptocurrency as a legal currency.
Cryptocurrency is also constantly on the radar of cybercriminals. These are the top 3 crypto hacks to date:
Cybercriminals abuse cryptocurrency in other ways too. For one, Bitcoin has long been exploited during ransomware attacks. Ransomware is the kind of malware that encrypts files on infected computers so that attackers could demand ransom payments in return for decryption software or passwords. To stay anonymous, attackers often rely on Bitcoin and other cryptos to collect the ransom payments.
Moreover, big crypto names are often used as clickbait in the subject lines of misleading phishing emails. Email phishing can help attackers steal login credentials, extract sensitive information or simply trick people into visiting malicious websites. So, if you ever receive a strange email suggesting a crypto reward – watch out.
IP address market
IPv4 addresses, similarly to certain cryptocurrencies, have a cap. As we discussed already, there are only 4.29 billion IPv4 addresses, which is not sufficient to satisfy all internet users globally. Once IANA allocated the last unused IPs from its pool, this resource became a desirable commodity.
Price history of IPv4 addresses
IPv4 addresses earned the commodity status very quickly. By the time IPv6 emerged in the mid-90s, the internet community was fully aware that this resource was running out. To add insult to the injury, IPv6 did not live up to the promise of replacing IPv4.
IPv6 deployment halted because every single device needed to be compatible with IPv6. According to Huston, “the number of devices that needed this [IPv6] transplant was growing faster than our ability to [adapt].” Eventually, the timeline for the predicted switch to IPv6 went from several years to a question mark.
Once it became obvious that IPv4 addresses weren’t going anywhere, the resource prices jumped up.
While the cost per IP address was around $5 in 2011, when IANA officially depleted the pool of IPv4 addresses, today, this resource goes for around $50. In fact, some IP brokerages sell IPs for up to $60 apiece. Our IPv4 price history report offers a much deeper view of the market.
The birth of the IPv4 lease market
Eventually, buying IPv4 addresses became more and more expensive, and companies that needed lots of IPs at once had to invest big. Smaller companies were unable to cover the costs and scale efficiently, which created a need for an IP lease market. IPv4 lease prices increased too, but if we compare leasing vs. buying an IP address, the latter still requires bigger investment upfront.
Moreover, as Huston points out, “leasing makes sense because no one wants to be left with a stranded, valueless asset on their books.” We know that IPv4 addresses will continue to be a profitable asset for years to come, but it is possible that, eventually, IPv4 addresses will lose value, and, in this case, buying may be too risky.
The average lease price per IPv4 address can range from around $0.50 to $0.80. While paying for the IP address may be more cost-effective in the long run, this option is not viable for many businesses around the world. The low upfront cost of leasing IPv4 addresses enables these businesses to grow in other ways because they don’t need to invest everything they have in IPs.
IPv4 addresses as a revenue stream
As we discussed, IPv4 addresses support the internet. They are, currently, somewhat irreplaceable, which is what makes them a desirable commodity. Unfortunately, not everyone can obtain IP addresses, and so investing in IPs is not available for everyone.
That said, if you have bought IPv4 addresses in the past and you are not actively using them yourself, you can have a continuous return on your investment. Let’s look at the pros and cons of monetizing IPv4 addresses and turning them into a revenue stream.
|Stable market||Vulnerable to cybercrime|
|Steadily high demand||Limited number of IPv4 addresses to buy|
|IPv4 is currently irreplaceable||In theory, should be replaced by IPv6|
|IPv4 is easy to monetize|
|Sale and lease prices keep increasing|
|Offers a steady revenue stream|
How to monetize IPv4 easily and safely
The IPv4 market is stable, and both sale and lease prices are increasing progressively and predictably. Of course, monetizing IPv4 addresses doesn’t come without risks. The reputation of your IPs depends on who is using your resources. If you choose to sell the resource, this will not bother you, given that you will give up ownership with a sale.
However, if you choose to monetize IPv4 addresses, you need to think about who will use your valuable resources. The good news is, you don’t need to worry about it yourself. You can employ IPXO to handle the abuse prevention and IP reputation upkeep for you.
Once you place your subnets in the IPXO Marketplace and lease them out at the prices you set yourself, experts ensure that your resources do not fall into the wrong hands. IPXO’s anti-abuse professionals employ automated tools to monitor your resources and prevent abuse in time. Thus ensuring that you can monetize your resources safely.
How easy it is to find lessees? According to Gabe Fried, the CEO at Hilco Streambank, IPv4 addresses are in such great demand that it is possible to find buyers within 30 days. It is possible to lease IPv4s even quicker, but it all depends on set lease prices.
To hear more from Fried, watch the Is IPv4 a Commodity? webinar.
If you’re unsure whether to sell unused IPv4 addresses or monetize them via leasing, check out this Leasing vs. Selling Calculator.
It is clear why IPv4 addresses are desirable, and that is why it’s not surprising that a black market has emerged. The resources in the black market are often unreputable and plague IP blocklists. Nonetheless, parties that may be unable to get IPv4 allocations legally are willing to purchase IPs from the shadows of the internet, even at unreasonable prices.
Ultimately, as the demand for IPv4 addresses increases, cybercriminals are becoming more active too. Static IP addresses are particularly vulnerable because many of them are not secure. This all comes back around to the fact that hundreds of millions of IPs remain unused. It’s easy to abuse these forgotten resources without anyone’s notice. Unfortunately, once companies try to bring the forgotten IPs back into the market, they often face issues regarding IP reputation.
What is IP hijacking?
IP hijacking, or BGP hijacking, is an act of taking over IPs by corrupting BGP routing tables that contain routing information. According to MANRS data, when comparing hijacking incidents between 2019-2020 among RIRs, it is clear that hijacking events increased across the board. Who’s to blame? The growing demand for IPv4 addresses, the hackers who are always looking for opportunities to make money and also those who are willing to use their services.
Note that not all RIRs have equal numbers of ASNs registered to them. The graph above shows that RIPE NCC experienced the most BGP hijacks in 2019 and 2020, but if you consider the number of ASNs per RIR, it’s actually AFRINIC that suffered the most.
AFRINIC’s name is also associated with what is widely known as the greatest IP address heist. It was reported in 2019 that 4.1 million AFRINIC’s IPs were stolen or misappropriated. Perhaps the most shocking detail of all is that the RIR’s employees were accused of allocating the resources illegally. At the beginning of 2021, not even half of the resources had been reclaimed.
IPv4 and crypto offer different opportunities
It’s undeniable that both IPv4 addresses and cryptocurrency offer exciting new opportunities to generate revenue. Of course, the monetization of these resources is quite different. While pretty much anyone can buy and trade cryptocurrency, monetizing IPv4 addresses is reserved for those who already have the resource. Moreover, while you can profit from crypto only by selling it at a higher price than the purchase price, you can monetize IPs continuously.
Unfortunately, investing in cryptocurrency can be a gamble. It’s incredibly hard to predict how the prices of any crypto will change from week to week. Moreover, the crypto market is not solely shaken by extreme price changes. Cryptocurrency is not yet accepted globally, and some countries have downright banned it. Furthermore, because crypto is not adopted fully around the world, there are plenty of usability problems.
As for IPv4 addresses, they are fully accepted, and the market is stable. However, the pool has been exhausted. That said, around 20% of all IPv4 addresses remain unused. Unused IPs are usually owned by large organizations that got their IPv4 allocations back in the 80s. Slowly but surely, they recognize the potential to make money by putting their unused IPs back into the market through leasing. The IPXO Marketplace makes this process safe and easy.
To learn more about IPv4 addresses as a commodity and to find out whether or not this resource could depreciate over time, watch the latest IPXO Webinar. The panel of speakers includes Gabe Fried, Nick Winters, Vincentas Grinius and Geoff Huston.