What Is IPv4 Address Exhaustion and How Can We Alleviate It?

Updated 21 February 2023
10 min read
6 November 2020
Vincentas Grinius

Unused IPv4 addresses have been handed out a decade ago, but companies across the globe continue to rely on them. Learn how to grow your business despite IPv4 address exhaustion.

A globe with glowing columns extending from it.

IPv4 – Internet Protocol version 4 – addresses are the backbone of the internet today, but they were originally introduced in 1981. Since then, the limited supply of this essential resource has decreased to pretty much nothing. Still, we continue to rely on it. The fact of the matter is that no one in the early 1980s could have predicted IPv4 address exhaustion. That is because the internet itself was not yet fully developed. 

Today, the shortage of IP addresses paralyzes businesses in all kinds of industries. And companies are unable to expand their operations and grow. This IPv4 shortage has led to the emergence of secondary IP markets and the resource becoming a fully fledged commodity. In this climate, IP holders have a unique opportunity to monetize unused IPv4 resources. And companies in need of IPs now have more favorable opportunities to acquire the IPs they need within their budgets.

So, how did we run out of IPv4? What are the consequences we deal with today? What are the ways we can resolve IPv4 address shortage? Let’s dig deep.

Key takeaways

  • Despite the introduction of Network Address Translation and other solutions introduced by the internet architects, free IPv4 addresses have been exhausted, and we now rely on reusing IPs.
  • IPv4 addresses have become a tradeable commodity due to the low supply and the increasing demand for the resource; unfortunately, IPv4 prices have skyrocketed because of that.
  • In a world that is still highly dependent on IPv4, leasing has proven to be a solution that supports both IP holders and companies in dire need of IPv4 resources. 

How did we run out of IPv4 addresses?

IPv4 emerged in 1981 and became the standard version of the Internet Protocol. The IPv4 address is a 32-bit number, and there are 4,294,967,296 unique addresses. However, a large portion of IPv4 addresses is reserved for various purposes. Including private networks, experiments (class E addresses) and multicast addressing. These IPs are not available for public allocation.

IANA (Internet Assigned Numbers Authority) officially distributed IPv4 addresses to the five RIRs (Regional Internet Registries) in blocks of approximately 16.8 million addresses each. However, IANA assigned the last of the free IPv4 space in 2011. And since then, RIRs have been distributing the allocated blocks to various companies and organizations.

Chart on how IANA splits the entire IPv4 pool.
How IP addresses are allocated to end users

Ultimately, why we ran out of IPv4 all comes down to poor resource management in the early days and the expansion of the internet, which picked up in the 1990s, when the number of internet-connected devices increased, and each needed a unique IP address.

Incorrect management of IP addresses in the early days

When the internet was still in its infancy in the 1980s, plenty of organizations were allocated far more IP addresses than they needed. That is because the initial classful network allocation method was inadequate to reflect reasonable usage. As a result, large companies and universities got class A address blocks with over 16 million IPv4 addresses each. This was due to a class B block with 65,536 addresses being too small to fulfill their needs.

In short, the classful network allocation led to inefficient IP distribution as some organizations had an oversupply of IP addresses. Many of these organizations continue to utilize public IP addresses for each device not accessible outside their local network even today. Moreover, some allocated IP address blocks or large portions of them have never been used.

By the early 1990s, it was apparent that the pool of available IPv4 addresses was rapidly depleting. The IPv4 addressing structure provided an insufficient number of publicly routable addresses to provide a unique IP address to every device connected to the internet.

Efforts to delay IP address exhaustion began in the early 1990s:

  • In November 1991, the IETF (Internet Engineering Task Force) created the Routing and Addressing Group (ROAD) to tackle the scalability problem caused by the classful network allocation system
  • In September 1993, CIDR (classless inter domain routing) was introduced to enable the transition from classful network addressing to classless inter domain routing to delay the exhaustion of IPv4 addresses 
  • In May 1994, NAT (Network Address Translator) was introduced to enable a private network to use one public IP address on the internet interface of the main internet router, and permit private addresses in private networks to further prolong IPv4 availability
  • In the early 2000s, CGNAT (CG-NAT or carrier-grade NAT) was introduced to enable more customers to access the internet via a small number of public IP addresses

The global internet community expanded

Although the main reason for IPv4 address exhaustion was insufficient capacity in the original internet infrastructure design, several additional factors increased the demand on the limited address supply.

The principal market forces that significantly accelerated Pv4 address depletion included the rapidly growing number of internet users, mobile devices and internet-connected devices.

During the 1990s, only a small fraction of households had internet access. Between 2000 and 2016, the number of internet users jumped from just 413 million to over 3.4 billion. Today, the number of internet users has surpassed 5 billion. Many new internet users in developing countries, notably in China and India, also contributed significantly to the shortage of IPv4 addresses.

Throughout the 1990s, consumers accessed the internet predominantly via the telephone model dial-up. The rapid increase in the number of dial-up networks increased address consumption rates. But the pool of assigned IP addresses was shared among many customer bases.

However, by 2007, broadband internet access began to exceed 50% penetration in many markets. Due to broadband connections being always active, the address uptake by ISPs (internet service providers) continued to drain the pool of available IP addresses. That is because ISPs automatically assign an IP address to every new customer. 

IPv4 increasingly became the standard when computing power merged with hand-held devices. Including mobile phones that became viable internet hosts, depleting the available pool of IPv4 addresses even further.

Regional Internet Registries ran out of IPv4

According to Geoff Huston’s research, the first RIR to run out of free allocated IPv4 addresses in 2011 was APNIC (Asia Pacific Network Information Centre). RIPE NCC (Réseaux IP Européens Network Coordination Center), LACNIC (Latin America and Caribbean Network Information Center) and ARIN (American Registry for Internet Numbers) followed suit in 2012, 2014 and 2015, respectively. 

Timeline of when five Regional Internet Registries ran out of IPv4 addresses.
IPv4 exhaustion across Regional Internet Registries

That said, all RIRs have set aside a small pool of IP addresses to transition to IPv6 – Internet Protocol version 6. ARIN and LACNIC have reserved the last /10 for the transition to IPv6. APNIC and RIPE NCC have reserved the last /8 block for IPv6 transition, while AFRINIC reserved a /11 block.

Today, companies that wish to receive allocations from their Regional Internet Registries have no other option but to join a waiting list. Unfortunately, the waitlist is long. In fact, a company might have to wait for around a year to get a small allocation of a single block (/24-/22). This all comes down to the fact that RIRs have a hard time reclaiming unused IPv4 space. 

What led to IPv4 becoming a valuable commodity

The IPv4 market is scarcity-driven and poses a challenge to companies looking to scale business. Though, technically, we haven’t run out of IP addresses completely, available IPv4 resources are quickly depleting. Less than 1% of the world’s supply remains for allocation. However, many unused IPv4s remain in the hands of large organizations. 

It’s worth noting that some organizations have returned large blocks of IPv4 addresses. Including Stanford University that returned their Class A IP address block in 2000, making 16 million IP addresses available. Other organizations that have done so include the US Department of Defense, Interop and BBN Technologies.

All in all, the pool of 4.29 billion IPv4 addresses has nearly dried out. As a result, the cost per IP address is skyrocketing. In December 2014, the average price per a single IPv4 address was approximately $10. By January 2017, the average price for the same resource had jumped to around $15 per IP. By February 2018 – $20 per IP. 

On average, IPv4 prices increase 25% each year, and in 2022, the average was just around the $45-$50 mark. Needless to say, we can expect further increases in the years to come.

A line graph of average IPv4 sale prices 2011-2022.
Average IPv4 sale prices, 2011-2022

The rapid depletion and high market demand for IPv4 addresses contributed to the ever-growing prices significantly. Back when the IP prices were around $5 per IP, no one thought that they would increase five-fold. And even with those prices, telecommunication companies struggled to board customers due to the shortage of IPv4 addresses. Naturally, the shrinking supply and the rising demand for IP addresses are increasing their value.

Ways to resolve IPv4 address shortages

Although classless inter domain routing, network address translation and other solutions have been employed to soften IPv4 exhaustion, they have not offered a fail-proof resolution. At the end of the day, IPv4 addresses are limited, and there is no way to create more of them. That said, there are other, more substantial methods that have been introduced to help minimize the effects of IPv4 depletion:

  • Wide-scale IPv6 adoption
  • Wider integration of the IP lease market
  • Reintroduction of dormant IPv4 resources

IPv6 adoption is slower than anticipated 

Despite all of the measures taken to prolong the availability of IPv4, they only put off the inevitable exhaustion of available IPv4 addresses. As a response to that, in 1998, the IETF initiated a replacement for IPv4, which came to be known as IPv6 – Internet Protocol version 6. 

IPv6 was designed to address the IP shortage problem long-term as it uses 128-bit addresses allowing for 3.4×1038 (340 undecillion) network addresses. IPv6 offers significantly more numerical addresses, simplifies address assignments and introduces additional network security features. However, its deployment is slow. Slower than anticipated. 

IPv6 deployment has been in progress since the mid-2000s but is still in the early stages. Major ISPs, networking equipment manufacturers, web companies and other internet providers pledged to permanently enable IPv6 for their products and services in June 2012. 

IPv6 adoption in numbers

In 2011, only 16-26% of conventional computers supported IPv6 and only 0.2% preferred IPv6. At the same time, approximately 0.15% of the top million websites were IPv6 accessible in 2011.

In January 2015, native IPv6 utilization hit approximately 5% as measured by connectivity among Google users. In January 2018, native IPv6 utilization hit 20%. By October 2020, native IPv6 utilization reached 33%. In February of 2023, IPv6 connectivity was around 42-43%.

Why is IPv6 adoption so slow? IPv6 requires a significant investment of resources and poses incompatibility issues with IPv4. That is because each version defines the format of addresses differently. The problem is that IPv6 hosts cannot directly communicate with IPv4 hosts and have to communicate via special gateway services. That said, IPv4 and IPv6 can operate simultaneously with the help of the dual stack methodology.

All in all, the transition to IPv6 is a long-term proposition. The delay in IPv6 adoption means that IPv4 addresses have long-term value and are increasingly significant to companies wanting to grow their business.

How to take full advantage of the IPv4 lease market

The current shortage of IPv4 addresses cannot be immediately solved by IPv6. However, the need for addresses amid the IPv4 shortage has inspired some creative solutions and gave rise to the IPv4 address lease market.

As there is still a high demand for IPv4 resources, the IPv4 address lease market’s emergence is the solution to the current IPv4 scarcity. IPv4 assets have become a tradeable commodity in the current market climate, presenting monetization opportunities for IP holders. Just as IPv4 sale prices continue to increase, so do the IPv4 lease prices. 

Average IPv4 lease prices 2014-2022.
Average IPv4 lease prices, 2014-2022

The gap between the supply and demand of IPv4 has led to the creation of companies that specialize in mediating the lease of IPv4 addresses. Such companies facilitate monetization and mitigate the risks of the controlled IPv4 assets.

Companies that offer IP monetization and leasing services – such as IPXO – match IP holders with small, mid and large address blocks looking to monetize their unused IPv4 resources with companies and organizations ready to pay top dollar to acquire said resources. IP holders can take advantage of the market and turn unused IP assets into an additional revenue stream.

On the flip side, the IP address lease market provides businesses in need of IP addresses with access to the resources they require. Due to skyrocketing prices, buying IP addresses has become very expensive. On the other hand, leasing provides a cost-efficient solution that empowers companies to expand their operations.

The surprising thing is that not many companies are aware that their unused IPv4 resources have monetization potential that they can tap into. Or they mistakenly believe that it is not possible to ensure the security of the leased assets. However, the fact is that not utilizing IPv4 resources means a loss of a potential revenue stream. 

Should IP holders monetize unused IP resources and should companies without IPs lease them?

Approximately 820 million of IPv4 addresses owned by large corporations are believed to remain unused. That is around 20% of the entire IPv4 pool. Which means there are still plenty of opportunities for companies to make money without so much as lifting a finger. Simultaneously, companies that cannot grow due to IPv4 scarcity, have the opportunity to get the resources they need without breaking their budgets.

Since IP addresses are a reusable resource, the lease market is perfect for companies that wish to retain ownership rights, but still wish to monetize their resources. At the same time, IP lessees have the freedom to lease short-term or long-term, depending on their needs. Ultimately, leasing is beneficial for both sides. It benefits those wishing to lease and those wishing to monetize their IPv4 resources. 

Now that there are few IPv4 addresses to go around, and there are still plenty of companies that rely on this resource, the IPv4 lease market can offer a terrific solution for both parties. Finally, with IP lease, we can help build a sustainable internet that promotes business growth. Check out our Ultimate Guide to IPv4 Lease for IP Lessees to learn more.

IPXO introduced the world’s first fully automated IP lease and monetization Marketplace in 2021. Today, it can offer more than 3 million vetted IPs from reliable IP holders. Soon, the IPXO platform will expand and offer even more unique and essential services for companies that rely on the Internet Protocol worldwide. 

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FAQ about IPv4 address exhaustion

What is IPv4 address exhaustion?

IPv4 address exhaustion refers to the depletion or shortage of IPv4 address reserves. The Internet Assigned Numbers Authority is responsible for allocating new IPs to the five Regional Internet Registries across the globe, but it stopped allocating free IPs back in 2011. Since then, most RIRs have exhausted their pools of IPv4, and now they only reallocate reclaimed IPs. Unfortunately, each new member, usually, can only apply for a single address block (/24-/22).

How many IPv4 addresses are there?
Are IPv4 addresses exhausted?
How long will IPv4 be around?
What happens when the IPv4 address pool is finally depleted?
What is being implemented to help solve your IPv4 address exhaustion?

About the author

Vincentas Grinius


Vincentas is a business-driven geek with over 15+ years of network, infrastructure and internet policy experience. As a CEO at IPXO, the Internet Protocol platform, Vincentas focuses on helping address complex network management issues and the global IPv4 shortage.
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