IPv4 Lease: Is It a Scalable Option?

Our digital communication and online activities rely on Internet Protocol addresses, or IP addresses, that identify devices and their locations on the network. There are two versions of IP addresses: IPv4 and IPv6. Unfortunately, we ran out of free IPv4 addresses a while ago. The IPv4 lease market emerged to tackle this problem, but is IPv4 lease a scalable option?

Why do we need IPv4 leasing if we can buy the addresses we need? Can IPv4 leasing supply us with IP addresses indefinitely? We discuss these important questions further in the article. First, let’s remember what an IPv4 address is and how IPv4 leasing emerged as a solution to the scarcity of this resource.

What is an IPv4 address?

IPv4 is the fourth version of the Internet Protocol – the communication standard that uses a set of rules to send data between networks. It was first introduced by DARPA in 1981. A few years later, the US Department of Defense adopted the TCP/IP suite; thus, paving the way for the wider adoption of the suite.

To manage all 4,294,967,296 IPv4 addresses effectively, the Internet Assigned Numbers Authority (IANA) emerged in 1988. To increase the efficacy of the distribution, the IPv4 address pool was later allocated to five Regional Internet Registries (RIRs). In turn, they distribute blocks of IPs to Local Internet Registries (e.g., internet service providers) that further allot them to end users.

Today, RIRs are still responsible for allocating free IP addresses in specific regions. However, the exhaustion of the resource over the past decades has led to the introduction of strict policies that limit the assignment of free addresses. Why? Due to the explosion of internet-connected devices in recent history, the pool of 4.29 billion IPv4 addresses quickly depleted.

As it turns out, 40 years ago, no one expected that IPv4 addresses would become a commodity.

How did IPv4 leasing develop?

According to Vint Cerf, also known as the father of the internet, everyone thought that 4.29 billion addresses would be enough to support the experimental internet. Cerf now jokes that the experiment escaped the lab. Essentially, what started as a test, today has evolved into a global network of networks that connects businesses and consumers worldwide. Essentially, what started as a test, today has evolved into a global network of networks that connects businesses and consumers worldwide.

However, the global expansion of networks has reached the point of IPv4 exhaustion. That means we no longer have IPv4 addresses to freely allocate to businesses that request them. The Asia Pacific Network Information Centre (APNIC) was the first RIR to exhaust its resources on April 19, 2011.

To address the global IPv4 exhaustion, IETF (Internet Engineering Task Force) introduced a new version of the Internet Protocol – IPv6 – in 1995. It was created with many advancements, but the most significant thing about IPv6 is that it offers a lot more addresses than its predecessor – 340 trillion trillion trillion.

Unfortunately, hardware limitations and huge adoption costs hinder the global IPv6 deployment. Due to these challenges, we are still far from transitioning to the latest Internet Protocol version fully. As a result, we still need IPv4 addresses.

The question is, do we have solutions that can alleviate the shortage of IPv4? Fortunately, yes. If companies need new resources, they can either buy or lease IPv4. That said, the two options are not equally sustainable in terms of cost. For example, the buyer might have to pay $60 per IPv4 address upfront, whereas leasing may cost as little as $0.55 per IP per month for an IP lessee.

To compare the investment costs, use our Leasing vs. Buying and Leasing vs. Selling calculators.

Undoubtedly, leasing can unlock IP address acquisition possibilities without substantial upfront investments. However, cost-effectiveness is not the only benefit that IPv4 leasing can offer to growing businesses.

IPv4 leasing is beneficial for both sides

Both lessees and lessors can unlock the benefits of IPv4 leasing. How? While spending less on the assets they need upfront, lessees can save money that could be directed to other important investments.

Is leasing only cost-efficient? No. Companies can also gain the assets needed for development quicker compared to buying. For example, the leasing procedure may take just a few days, whereas buying IP addresses may take weeks. Not to mention that purchasing IPs can be a highly complicated process too.

Another advantage that IPv4 leasing offers is that no long-term commitment is required. For example, companies can lease IP addresses for 12 months and then terminate or extend the lease agreement depending on their needs.

What’s in it for IP lessors? They can unlock new streams of income from the resources they already own but do not use. By putting up their assets for lease, companies can make money and contribute to the creation of a more sustainable internet.

Also, if companies choose to lease their assets, they don’t need to worry about managing a large pool of unutilized resources. Network administrators, in turn, can save time on other vital tasks.

Essentially, IP holders can enjoy a full-service IP monetization experience. A standard 5% platform fee for IP holders is applied only when subnets are monetized and is deducted monthly.

Despite the many great benefits, some companies might choose to hold onto IP addresses without leasing them until they can sell the asset at a higher price. But what if the IPv4 market collapses? In this, albeit unlikely, case, companies would be left with a valueless asset. Due to this risk, companies that choose to hold onto IPv4 addresses should consider monetizing IPs until they find a buyer.

Is it possible to scale IPv4 leasing?

Let’s not forget that the number of IPv4 addresses does not increase when we lease or monetize them – we have exactly 4.29 billion IPv4s. However, a great portion of these addresses remain unused and could, potentially, be put up for lease.

For example, RIRs have been retrieving unused legacy IP addresses from the companies that received large allocations before RIRs were established. Some of those companies have already returned the unused resources, while others have not.

At the end of 2021, RIRs had returned 5.2 million IPs to the general pool. Needless to say, 5.2 million IP addresses cannot satisfy the lease market indefinitely.

Luckily, companies that possess a great number of unused IP addresses have started appreciating the monetary value of IPv4. As a result, many companies now choose to repurpose their assets by selling or leasing them. However, not all companies are fully familiar with what IP lease providers can offer.

Higher awareness of the benefits linked to IP leasing may attract companies to monetize their unused resources and contribute to the more sustainable use of IPs. But is monetization the ultimate solution to IPv4 depletion?

What if companies holding IPv4 addresses monetize them and lessees lease them indefinitely? Eventually, this may decrease the number of available IP addresses once again. Furthermore, the market may exhaust the list of IP holders with unused resources.

Ultimately, the IP lease market is ever-evolving, and we must continue innovating and creating new strategies to ensure the longevity of IPv4 resources until a wider adoption of IPv6.

A responsible approach to IPv4 longevity

IPv4 exhaustion is a global issue that requires long-term solutions. Ironically, the more advanced version of the communication protocol – IPv6 – emerged 27 years ago to address the problem and is yet to replace IPv4 anytime soon.

In the meantime, the IPv4 lease market offers the best solution to the IPv4 depletion crisis. However, this solution is still relatively unexplored by IP holders. Therefore, it is crucial to raise awareness of the monetization potential and leasing benefits.

Unfortunately, the number of IP addresses available for monetization and lease is limited. On the flip side, the leasing market still has a lot to offer. And there are still many companies that can turn their unused IPv4 addresses into money while enabling other companies to scale.

Ideally, IPv6 will solve the current issues in the future. But before that happens, we need to ensure sustainable and responsible use of IPv4 addresses. And we need to continue innovating the IP lease market to ensure that today’s internet remains sustainable for decades to come.