This post explores the concepts of public and private IP addresses and networks, and how Network Address Translation (NAT) can be used to extend the available number of public IP addresses, both globally and locally.

Each device connected in a computer network is assigned a unique identifier called an Internet Protocol (IP) address to ensure it receives messages and information intended for it. The Internet was designed as an end-to-end network, meaning in the early days, each device had its own unique public IP address. However, the Internet grew quickly in the late 1980s and early 1990s with the increasing popularity of personal computing and the World Wide Web. It became clear that the number of addresses available in the current version of IP addresses, IPv4, would not be enough to assign a unique IP address to each device connecting to the Internet.

RFC 1631, The IP Network Address Translator, was published in May 1994 to help solve this problem and address scaling in routing. RFC 1631 proposed reusing IP addresses and, in effect, created private IP addresses. A device in a home network would be assigned a private IP address for communicating with other devices within that network. NAT would sit on a router at the edge of a private network and assign a public IP address to any device connecting to the public Internet. This is basic NAT and is shown below. The diagram’s detailed view shows that NAT changes the source address in the packet it receives before sending it to its destination.

Internet Service Providers (ISPs) and operators of large networks, such as universities, ran into problems scaling NAT in the late 1990s. Carrier-grade NAT (CGNAT) techniques were introduced, such as NAT444, which adds another private network between the user’s private network and the public Internet, as shown below. CGNAT added more logging and security capabilities that aren’t available with NAT in addition to helping ISPs conserve their public IP addresses.

As it became clear in the late 1990s that networking needs would outstrip the 4.29 billion addresses available in IPv4, IPv6 was proposed. IPv6 has 1028 times the number of addresses as IPv4, or about 340 trillion trillion trillion (undecillion) addresses. IPv4 and IPv6 are not compatible, so other NAT solutions became necessary: NAT64, in which a gateway acts as a translator between IPv4 and IPv6 networks, and Dual-Stack Lite, in which the carrier’s network uses IPv6 to connect to the public Internet.

Initially, implementing CGNAT was costly as it required a proprietary device and software. However, lower cost solutions are now available, including virtual CGNAT software that can be installed on off-the-shelf hardware. Another objection to CGNAT is that it broke applications that needed a static public IP address, such as games. These issues have been resolved with application layer gateways and by application developers, who no longer rely on static IP addresses.

As mentioned above, CGNAT provides enhanced logging and security capabilities. Because NAT and CGNAT sit at the edge of private networks, they are often paired with firewalls. NAT and CGNAT also help solve the problem of the dwindling availability of public IPv4 addresses and address blocks—an ISP or large private network uses fewer public IP addresses with CGNAT techniques. CGNAT allows an organization to continue using public IP addresses on a private network.

Organizations can use CGNAT to reduce the number of public IP addresses needed, leaving the remaining IPv4 address block available for sale. Doing so helps the Internet keep pace with demand as more devices connect to it and it helps ISPs and organizations keep pace with increased public network usage, such as the very recent demands the COVID 19 pandemic have placed on the Internet. Conserving public IPv4 addresses and monetizing the unused addresses is also a source of revenue for organizations, one that may not have been previously considered.

NAT, specifically CGNAT, allows companies to conserve their public IP addresses while still being able to use them in a private network. Using CGNAT can help contribute to the health of the Internet as a whole while also contributing to a company’s bottom line through monetization of the remaining public IP address block with no disruption to the current private network service.

Addrex has helped companies monetize excess IP address blocks since 2009 and has successfully facilitated the transfer of over 32 million IP address numbers between buyers and sellers. Addrex began as a broker and has since evolved into a global Marketplace that encapsulates all of the services a broker provides. Our online platform is available 24/7, 365 days a year: we are effectively a broker with a global Marketplace. Contact Addrex to sell excess public IPv4 number blocks or acquire additional public IPv4 address space via [email protected]!

In May 2019, Addrex contacted Hoa Nguyen, Vice President for Administration and Business Affairs at Heidelberg University in Tiffin, Ohio, to see if the University would be interested in selling an IPv4 block they had received in 1990 to generate additional revenue for the University. Mr. Nguyen saw the perfect opportunity to fully fund several IT projects; as is the case at many colleges and universities, competition for the general fund is fierce, and even when funding is received it is often partial, leaving departments to somehow fill the gap. Proceeds from the sale of Heidelberg’s block would be earmarked specifically for IT projects.

There was just one roadblock: Heidelberg was using about 4% of the IPv4 addresses in the block, both externally and internally. To clean or prepare the block for sale, they would have to ensure their network wasn’t publicly using any of the addresses in the block. Ultimately, Heidelberg needed to more efficiently use their IP address space by implementing network address translation (NAT) and port address translation (PAT) in their network. This was their biggest technical challenge in selling the block and it took a few months to implement. Once NAT was established, they converted about 80% of the in-use addresses in two weeks, while the remaining 20% were more of a challenge and took additional time.

After the University began cleaning the block, ensuring that no IP numbers were in use and that its reputation was good, Addrex listed the block for sale in its Marketplace in January 2020. By the end of March, just as the COVID-19 quarantines began, an interested company committed to buying the block and the closing process began, when the buyer and seller are privately introduced. Funds were placed in escrow at the end of April and a few weeks later, the transfer process  was completed, and Heidelberg was able to fully fund several IT projects with the proceeds left over after accounting for the network redesign.

Mr. Nguyen had this to say about Heidelberg’s experience with Addrex and the Addrex Marketplace:

Heidelberg University worked with the Addrex team to sell our IPv4 blocks in the Addrex Marketplace. Addrex guided us through the complex transaction and made it a seamless and quick endeavor.

Based on their experience and knowledge of the IPv4 resale market, I sincerely recommend Addrex and their Marketplace services for both block recovery and as a sales venue. They were responsive, reliable, and trustworthy through the entire transaction.

– Hoa Nguyen, Vice President for Administration and Business Affairs, Heidelberg University

 

Addrex continues to work with colleges and universities to help them accomplish their funding goals in a challenging education environment through monetizing unused IPv4 numbers and supporting their network transformation.

Colleges and universities across the world endured an enormous financial impact. Educational institutions suffered from plummeting international enrollment, costs of adjustment to distance learning, COVID testing/protocols, and many other issues related to the “new normal”. The American Council of Education (ACE) sent a letter requesting at least $120 billion for higher education to mitigate challenges faced by these organizations.

However, colleges and universities are also becoming creative in raising funds independently to cover budget shortfalls. One of the ways educational institutions are securing relief is through the monetization of their IPv4 number blocks. Addrex has helped multiple educational institutions navigate IPv4 monetization and overcome impediments to a successful sale.

Monetization of legacy IPv4 resources is not a new concept. Addrex pioneered this market in 2011, when it facilitated the court-approved transfer between Microsoft and Nortel. Many educational institutions are aware of the IPv4 opportunity, and some have already taken advantage of it. These organizations have transferred almost 20 million IPv4 numbers, equivalent to 303 x /16 blocks, 19 million transferred from US institutions alone.

According to our research, the most transferred block size is /16 (65,536 numbers), as it brings the most value and is in the highest demand among buyers. As can be seen from the chart above, educational IPv4 transfers slowed in 2020, perhaps reflecting that organizations were busy mitigating the COVID-19 pandemic impact. However, early 2021 has already seen a spike in educational organizations interested in monetizing their IPv4 blocks and Addrex has received multiple inquiries on this topic.

Finance and legal divisions are sometimes advised against IPv4 monetization due to the perceived challenge of switching from legacy numbering schemes to more modern solutions. IPv4 blocks were allocated to these institutions throughout the 1980s and 1990s, and they often continue to use these numbers internally, when there is no longer any real need. Even externally, most college and university networks do not require the use of an entire /16 number block, and their use has frequently been replaced with business ISPs or commercial cloud solutions. In cases where current internal numbering schematics must remain, there are possible solutions such as Carrier Grade Network Address Translation (CGNAT). In addition, some universities hold both Class B (/16 = 65,536) and Class C (/24 = 256) blocks. Organizations in such situations sometimes opt to consolidate use onto the /24 to achieve higher efficiency and free up the /16. When educational institutions must keep IPv4 numbers for public-facing infrastructure, we recommend they acquire a small IPv4 block and move necessary resources there to monetize the /16 block.

Addrex, Inc. (www.addrex.net) operates a global IPv4 Marketplace, has facilitated the transfer of over 30 million IPv4 numbers, and works with educational institutions to help monetize their IPv4 assets. Funds secured from such transactions help fill budget shortfalls and support underfunded projects or university scholarships and stipends. Monetization of IPv4 blocks helps colleges and universities secure funds for important causes and sustains the core infrastructure of the ever-growing Internet.

2020 was a vibrant year for IPv4 market and registry updates. About 42 million numbers were transferred in 2020. An additional 47.5 million numbers were updated due to company mergers and acquisitions.

The single largest transferred CIDR block this past year was a /9, going from APIDTT PTY LTD to Alibaba.com Singapore E-Commerce Private Limited. The decision to transfer and sell this historical resource was made by the WIDE project, the holder of the original 43.0.0.0/8 block. The funds received will support vital Internet development initiatives in the Asia Pacific region. Another large transfer from the same /8 block was made earlier in the year, a/10 received by Tencent Cloud Computing (Beijing) Co., Ltd. The remaining /11 is still held by APIDTT PTY LTD in the APNIC database.

Some notable M&A updates resulted from the merger between Sprint Corporation and T-Mobile USA Inc. that was officially completed in April 2020. Including transfers resulting from the earlier merger of Tele2 NL and T-Mobile NL, a total of 22.5 million numbers were updated to the current holder.

Examining the transfer logs provided by the RIRs in greater detail, we identified some transfers that should have been recorded as M&A, as they resulted from changes in company administration. After analyzing the names of the originating and receiving organizations, we estimate that about 3.3 million numbers were administrative in nature and not policy transfers. Example reasons include:

1. Transferring blocks from parent organization to subsidiary;
2. Updating blocks from a former subsidiary no longer in operation to the current company name;
3. Sharing resources with strategic technology partners; and
4. Simply moving blocks from one org handle to another in the registry database.

When looking at RIR transfer logs, we should also keep in mind that APNIC doesn’t differentiate between administrative updates and policy transfers, while RIPE doesn’t include Legacy blocks in their transfer logs. Below is our summary of 2020 market transfers:

The year ended with cloud infrastructure providers, Internet hosting companies, data center operators, mobile network operators, and e-commerce companies being top buyers in the IPv4 transfer market. We are enthusiastic to see what 2021 brings, and will continue to monitor and analyze the exciting market of IPv4 transfers.

A Regional Internet Registry (RIR) is a non-profit organization whose main purposes are to manage, distribute, and register Internet number resources – including IPv4 and IPv6 number blocks and Autonomous System (AS) Numbers – within their respective regions.

There are five RIRs scattered around the globe; each is slightly different, in part, due to the laws of the country in which they operate. Although there is some similarity in their operational processes, procedures, and contractual requirements, there are significant differences in their policies and contractually specified service terms and conditions. Each RIR is, independently, in a continual state of change related to regional policies and contractual conditions.

The five RIRs are:

• The African Network Information Center (AFRINIC), which serves Africa;
• The American Registry for Internet Numbers (ARIN), which serves Antarctica, Canada, parts of the Caribbean, and the United States;
• The Asia-Pacific Network Information Center (APNIC), which serves serves East Asia, Oceania, South Asia, and Southeast Asia;
• The Latin America and Caribbean Network Information Centre (LACNIC), which serves most of the Caribbean and all of Latin America; and
• The Réseaux IP Européens Network Coordination Centre (RIPE NCC), which serves Europe, Central Asia, Russia, and West Asia.

The Internet Assigned Numbers Authority (IANA) allocates Internet resources to the RIRs who, in turn, follow their regional policies to delegate resources to their customers, which includes Internet service providers, enterprises, and academic institutions. IANA is a standards organization that performs other functions, including AS number allocation and root zone management in the Domain Name System (DNS). IANA was formed in 1988 and is now a part of the Internet Corporation for Assigned Names and Numbers (ICANN), a nonprofit private US corporation that oversees the Internet. Addrex is very active in the industry and works with all five RIRs as well as Internet-governing bodies like ICANN to help shape policy and procedures.

An RIR account enables you to manage the IP address resources associated with you or your organization. RIRs typically require your organization to have an account in order to transfer your IPv4 number block resources to another organization. The transfer process also typically includes proving the ownership of the IPv4 block(s), which our Research and Legal Teams synthesize and provide as part of our services for sellers.

One of the advantages of using Addrex to buy or sell IPv4 blocks is that we are able to guide our clients through the nuanced requirements of each RIR. We are a truly global company, having successfully transferred IPv4 number block rights in over 25 countries.

What is the difference between an IPv4 address and an IPv6 address? Let’s start by defining what an IP address is. Each device or interface connected in a computer network is assigned a unique identifier to ensure it receives messages and information intended for it, much like a telephone number or a mailing address. Most networks today, including the Internet, use the Internet Protocol (IP) address defined in the TCP/IP protocol suite. The organization that defines and manages TCP/IP, the Internet Engineering Task Force (IETF), has defined two kinds of IP numbers over time: IPv4 and IPv6.

An Internet Protocol version 4 (IPv4) address, in human-readable decimal (base-10) format, is four numbers-only segments separated by dots, for example: 127.0.0.1 or 192.168.4.10. Each of the number segments has a decimal value of 0 to 255; each is a binary (computer-readable) octet (8 bits), making an IPv4 address 32 binary bits long.

In comparison, the more recent Internet Protocol version 6 (IPv6) uses 128 binary bits in an address on the network with eight groups of hexadecimal (base-16) numbers separated by colons:

IPv6 has two rules to shorten the length of the hexadecimal number:

• Discard leading zeros, so the 5th section, 0063, is shortened to 63.
• If two or more sections contain consecutive zeros, replace them with double colons.

Following these rules gives us 2001:0:3238:DFE1:63::FEFB as the IPv6 address.

The IPv6 pool of available addresses is much larger than the IPv4 pool due to the use of hexadecimals as well as having eight groups of numbers instead of four. An IPv4 address is 32-bits long so the pool is 2³² in size, about 4.29 billion, which might seem like a lot until you consider that most of those IP addresses have been assigned. An IPv6 address is 128-bits, so the pool is 21²⁸ in size or about 340 trillion trillion trillion (undecillion) IPv6 addresses – that’s 1028 times the number of IPv4 addresses.

IPv4 capabilities are built into every piece of networked gear on the Internet today. IPv6 has been slow to be adopted and implemented – it was introduced in RFC 1726 in 1995 and RFC 2460 in 1998, which was superseded by RFC 8200 in 2017. In November 2020, only about 30% of Google users were capable of supporting native IPv6 traffic¹. In addition, IPv4 and IPv6 coexist in parallel on the same physical network.

1. https://www.google.com/intl/en/ipv6/statistics.html

With one more month of 2020 ahead of us, we have already witnessed a highly active IPv4 transfers market this year. According to the transfer logs (raw data) available from the Regional Internet Registries (RIRs), over 40 million numbers have been transferred since January 1, 2020. About 20 million additional numbers have been updated due to company mergers and acquisitions.

Our analysis shows that the market varies considerably in terms of size and number of transactions. Transfers in the ARIN and APNIC regions are dominated by fewer organizations that acquire larger blocks, while number blocks in the RIPE region are mostly transferred in small blocks (for example, /22).

If we look at overall resource transfers, /21 and smaller blocks are the most commonly transferred block sizes.

As always, we will continue to monitor and analyze the IPv4 transfer logs to help our clients better understand the IPv4 market and will provide another overview of the entire year in January 2021. As of today, the data shows a mature and well-established secondary IPv4 number block market, with cloud service providers and ISPs contributing the most activity.

An IP number block is a group of IP numbers that have not yet been assigned to specific devices on a network; once assigned and in use, IP numbers technically become IP addresses, although many people refer to IP numbers and IP addresses interchangeably.

In the beginning, the United States government and its contractors assigned IP number blocks by class, as follows:

This method had inefficiencies that exhausted the availability of IPv4 numbers faster than necessary. For example, when a small organization required addresses for 255 devices, a class C number block would not be sufficient so they would obtain a class B block and not use over 65,000 of the available IP numbers in the block. With only a finite total of IPv4 numbers available (2 or about 4.29 billion), in the late 1980s and early 1990s when personal computing exploded in popularity and the World Wide Web (WWW) was invented, it quickly became apparent that this inefficient method of assigning blocks would exhaust the number of available blocks quickly. To address this, Classless Inter-Domain Routing (CIDR) was introduced in 1993.

CIDR is an efficient IP addressing scheme that reduces the size of routing tables and makes more IP numbers within the designated number block available for use as an IP address. CIDR notation specifies the starting number and size of a block and is expressed as an IP number block followed by a slash, followed by the decimal number of the leading bits of the routing prefix; for example: 192.168.0.0/16. The number to the right of the slash, in this case a 16, is the CIDR notation number block size. To count the quantity of contiguous numbers in the block, subtract the CIDR notation number block size from 32 and then raise 2 to that power – in other words, 2^(32-CIDR) or in the case of our example, 2¹⁶ = 65,536 or the size of an original Class B block.