Part 1 – The root of the issue

The Looming Connectivity Crisis Will Leave Traders Disconnected

Four billion IPv4 addresses simply are not even close to accommodating the modern internet any longer.

This article was written by Barry Bahrami who is the CEO of Commercial Network Services.

Importance of IP addresses

Almost everyone has some understanding of what a public IP address is. It is a unique number assigned to devices participating on the internet so they can communicate with other devices, much like a unique telephone number is to the public telephone network.  Internet Protocol version 4 (IPv4) was developed for the original internet, called ARPANET, back in 1978.

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The IPv4 address space contains 4 billion addresses.  That is simply no longer enough to accommodate all internet participants and all of their connected devices.  Every day brings us a little closer to the point where ISPs will be unable to assign an exclusive IPv4 address (whether static or dynamic) to all customers.

In 1993, The Internet Engineering Task Force (IETF) predicted that the internet would run out of IPv4 addresses sometime between 2010 and 2017, resulting in the start of development of what became Internet Protocol version 6 (IPv6).

IPv6 contains 340 undecillion addresses (340 trillion, trillion, trillion), enough to accommodate everyone and all of their devices for the foreseeable future.   IPv6 was made available to the global internet in 1999.  Its use is very similar to IPv4 and typically does not require much extra work to deploy in an already operational network.

Decreasing availability; increasing cost

The Internet Assigned Numbers Authority (IANA) pool of available IPv4 addresses was exhausted in January 2011. Other regional registries followed: APNIC ran out in April 2011, RIPE exhausted its pool in 2012 and ARIN in September of 2015.  From these dates forward, not everyone who needed an IPv4 address has been able to obtain one, unless they are willing and able to pay a pretty penny for them.

Current rates on the resale market are about US$8/IP for a /15 block (131,072 addresses).  For a smaller size /20 block (4096 addresses) the going rate is around US$13 per IP address.  And these costs continue to increase as the number of available IPv4 addresses on the resale market decreases.

These pools became exhausted long before new and IP address hungry technologies started being deployed. And with these new technologies here now, such as IoT and connected cars and wearables coming online quickly, the need for IP addresses will not be slowing down anytime soon.  This will continue to drive the cost of IPv4 addresses up until it reaches a breaking point.

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Cisco predicts 50 billion interconnected devices by 2020.  Intel says 200 billion.  Regardless who you believe, four billion IPv4 addresses simply are not even close to accommodating the modern internet any longer.

“Ultimately, when the cost of buying IPv4 addresses becomes more than the cost of deploying IPv6, we expect to see a major shift in the market,” says Alex Pawlik, Managing Director of RIPE. “It’s a shrinking market – while an IPv4 address may be worth about $10 now, in the long-term they’ll be worthless. IPv6 is here to stay.”

From what I have seen, most of the IPv4 buyers are large ISPs who are grabbing up IP addresses as fast as they can before they are all gone so they can continue accommodating new customers and all of their connected devices while they gain more time to roll out IPv6. And IPv6 is being rolled out – fast.

With the cost of IPv4 addresses increasing rapidly and with a very finite supply, time is literally money.  A number of mobile carriers are already IPv6 only, employing Network Address Translation (NAT) to enable IPv4 connectivity.  Think of NAT like a corporate PBX system, putting many extensions behind a single (public) telephone number.

At some point ISPs will only be able to assign to their customers a dedicated IPv6 address and, at best, an IPv4 address shared with other customers through NAT. But that is only half of a circuit.

It takes two sides to make a circuit and so an IPv4 address is required on the other end too – at the edge.  In this case the edge is the many brokers, signal services and VPS providers that retail traders rely on.

This can (and eventually will) lead to serious headaches for any edge provider that does not support IPv6 because we have become accustomed to one IPv4 address belonging to one user or at least a group of related users. This will no longer be the case for IPv4 traffic.

I will review specific issues IPv4-only providers can expect to experience in part two.

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