8 February 2022 | 6 min read

How IPXO Helps Hosting Companies Mitigate IPv4 Exhaustion

IPv4 exhaustion negatively affects the hosting industry. Why do hosting companies need IPv4 addresses? How do they cope with IPv4 exhaustion? What solutions are available? Continue reading to learn more.

A laptop surrounded by hosting servers.

Internet Protocol (IP) addresses are a crucial part of the internet. Every time a new device connects to the network, it receives a unique numerical label – an IP address. Without it, our devices, such as phones or printers, would not have access to the online world. 

History showed that, despite its importance, we took the first version of the Internet Protocol – IPv4 – for granted. Unfortunately, careless allocation and unforeseen expansion of the internet exhausted the address pool much quicker than expected. 

In 2011, the Internet Assigned Numbers Authority (IANA) allocated the last block from the IPv4 address pool. In turn, IPv4 addresses became a commodity. Experts even compare them to the more traditional commodities such as gold or even cryptocurrency. 

Nevertheless, IP addresses aren’t simply a luxury. To many businesses, such as hosting companies, they are a necessity. Both small and large hosting providers rely on IPs to continue delivering their services, such as private virtual servers and web hosting. The scarcity has urged companies to find alternative ways for IPv4 sourcing.

While there isn’t a single fix to the IPv4 exhaustion problem, IP leasing seems to offer a promising solution. Can IP lease take the IPv4 scarcity burden off hosting providers’ shoulders? We discuss the issue in this article. 

What is IPv4 exhaustion?

Before we dive deeper into how the IP lease market works, let’s look into what led to the global IPv4 scarcity we deal with today.

Line graph showing the full depletion of IPv4 addresses from 1989 to 2011.
Global IPv4 exhaustion between 1989 and 2011

Two main reasons drove IPv4 exhaustion:

  • The rapid expansion of the internet
  • An ineffective classful network allocation model

Network scientists have anticipated the depletion of IPv4 since the late 1980s. The reason for that is simple – when creators introduced IPv4 in 1981, they couldn’t imagine how quickly the internet would grow in the coming decades. Thus, the original internet architecture offered only around 4.3 billion addresses. 

In the early days of the internet, computer scientist Jon Postel was responsible for IPv4 coordination. Soon, the process became too complex for a single person to manage, and IANA emerged as a global coordinator of internet number resources. 

IANA continues to manage autonomous system numbers and IP addresses today. The organization distributes IPs to five Regional Internet Registries (RIRs). In turn, the registries allocate addresses to Local Internet Registries (LIRs) and National Internet Registries (NIRs).

Another reason for IPv4 exhaustion is an ineffective architecture that was used to allocate IPs in the early days. The architecture in question is called a classful network. This method divides the IP address space into 5 classes, each of which has different network sizes:

A table representing main three IPv4 address classes - A, B and C.
IPv4 IP address space classes

The classful network omits classes D and E from being used for network hosts. Class D is dedicated to multicasting and class E – to experimental and research purposes. 

As a result of this model, many organizations received more IPs than needed. Some even millions more. For example, if a large organization requested 100,000 IPv4 addresses, internet resource administrators would allocate a class A address space. 

As a result, internet administrators oversupplied companies with IP addresses. Even today, some large corporations possess millions of IPv4 addresses with no intention of advertising them. Meanwhile, companies that need IPv4 addresses deal with IPv4 scarcity.

Why do hosting companies need IP addresses?

Hosting companies provide servers for individual users and companies. The clients can use these servers to host their websites, files, video games and other content. The hosting companies usually offer these services:

  • Shared hosting 
  • Dedicated hosting 
  • Collocated hosting 
  • Virtual private server hosting 

IP addresses are a vital resource to run hosting servers. Like a printer or a smartphone, every server requires IP addresses to connect to the internet. That’s why if a hosting company wants to bring in new clients, it has to own a sufficient pool of IP addresses. 

Moreover, hosting providers don’t only use IPs for their hosting systems. They also provide them to their clients. Depending on their industry, users may need thousands of IPs for sending bulk emails, web scraping and other activities.  

How hosting companies are dealing with IPv4 exhaustion

Since the Covid-19 pandemic began in early 2020, the adoption of online platforms has increased exponentially. For instance, Statista reports that, in 2020, time spent playing video games increased by 39%. This shows that demand for hosting services is on the rise. Unsurprisingly, the market size of web hosting services has reached $83.99 billion in 2021 and is projected to grow to $267 billion in 2028.

The rapid market growth makes hosting companies particularly vulnerable to IPv4 scarcity. 

Here are several ways hosting providers deal with IPv4 exhaustion:

  • Shared hosting
  • Bring your own IP (BYOIP)
  • IPv6 adoption

IPv4 exhaustion countermeasures

Shared hosting allows several users to share the server space. Shared hosting makes the internet more sustainable and positively impacts IPv4 scarcity. This type of service is cheap, but clients can be discouraged by subpar performance and possible security issues. 

Three computers serviced by the same hosting server in a shared hosting environment.
Shared hosting

A feature many companies adopt is Bring your own IP (BYOIP). It allows users to employ their own publicly routable IPv4 addresses and use them within a cloud infrastructure. Yet, this method doesn’t help users who don’t have a sufficient amount of routable IP addresses. 

It seems that the most promising option is to transition to IPv6 addresses. IPv6 is the newest Internet Protocol version created to mitigate IPv4 exhaustion. Unlike IPv4, the newest version has a virtually infinite number of unique addresses – 340 undecillion. 

Despite it being the future of the internet, IPv6 adoption is painfully slow. According to Google’s IPv6 Adoption statistics, in February 2022, only 37.55% of the internet was powered by IPv6. 

Companies and internet service providers don’t rush to transition. It’s easy to understand why. When the Internet Engineering Task Force developed IPv6, it decided that the protocol would not be backward compatible with IPv4. As a result, many systems and platforms do not support the newest protocol. 

IPv6 and IPv4 incompatibility has made the adoption process overly difficult and expensive. Naturally, it discourages many companies from taking action. 

Evidently, shared hosting and BYOIP can only temporarily relieve the need for resources, and networks are not yet ready for full IPv6 adoption. So, how else can hosting companies gain IPv4 addresses? The answer may lie in the IP lease market. 

How can IPv4 leasing help hosting companies?

As we mentioned in the beginning, IPv4 addresses have become a commodity. It’s a valuable, scarce and expensive resource. The current price per IPv4 address is around $50, and it is expected to rise in the future. 

As a result of the current market situation, companies are turning to IPv4 leasing. While buying IPs may not be a feasible solution for everyone, IP address leasing comes with impressive benefits. Let’s discuss if leasing can triumph over buying IPs. 

The disadvantages of buying IPv4 addresses 

Buying IP addresses may seem like the most reasonable solution, especially when you need to rapidly scale your business. Buying an IP address gives you full control of the resource. Furthermore, since IPv4 sale prices constantly rise, buying an IP address might enable you to turn a profit if you decide to sell it later. 

However, there are some drawbacks worth considering. Currently, the price per IPv4 address runs at around $50. If a company needs 100,000 IP addresses, the seller expects an upfront payment of $5,000,000. 

Scales showing that IPv4 buying is much more expensive than IPv4 leasing.
The cost burden of buying vs. leasing IPv4 addresses

Justifying a cost this big may not be sustainable. The truth is most hosting companies have a lower margin of profit. When making $2-3 a month per user, paying $50 per IP may not sustain a business. 

Furthermore, the buying process is lengthy. It can take several weeks to months before you can start utilizing the resources you purchased. 

Why leasing IPs is the better alternative

By becoming an IPXO client, you can reap various IP address lease benefits. Unlike buying IPs, leasing them on our platform allows you to utilize the resources within the same day. The entire process is simple and easy to understand. 

Furthermore, the IP lease market is constantly growing. More and more businesses choose to lease their resources. This is especially beneficial for hosting companies that need a lot of subnets. 

IPXO allows clients to pick what they need. You can filter subnets by size, geolocation, octets and RIRs. 

Conveniently, unless you prefer otherwise, leasing IP addresses also does not require a long-term commitment.

Undoubtedly, the cost of lease is the most important benefit. You can still profit if you decide to lease instead of buying IPv4 addresses. The cost per IP address will add only 40-50 cents a month to your expenses. 

You can compare the upfront costs required for leasing and buying using IPXO’s Leasing vs. Buying Calculator

Leasing vs. Buying calculator comparing upfront costs.
Leasing vs. buying IPv4 calculator

Conclusion

No one could have foreseen how much the internet would expand since its inception. Unfortunately, the growth of internet-connected devices quickly depleted the pool of available IPv4 addresses.

The scarcity has pushed companies in hosting and numerous other industries to find alternative ways for sourcing IPs. 

IPXO Marketplace offers a cost-effective and fast solution – IP address lease. Our customers have access to millions of IPv4 addresses that can be leased from vetted IP holders at low upfront costs.

Undeniably, leasing is one of the more lucrative solutions for hosting providers struggling to scale their business due to IPv4 address scarcity.