IPv4 addresses were first publicly traded in early 2011, and since then nearly all transfers have required buyers to pay in full for addresses. In fact, that cash outflow comes before the addresses even begin the transfer process, with an escrow agent holding the money while the relevant RIRs process the transfer.

As prices have roughly quadrupled since 2011, buyers have found it increasingly difficult to meet the upfront payment requirements and have sought other options.

Banks and financiers will not accept IPv4 addresses as security for loans, leaving few options for those who require IPv4 for business purposes. IPv4 addresses are an appreciating asset that makes those who own them more likely to hold on to them.  But it makes sense to monetize these assets while holding them.

So, there is incentive for buyers and sellers to instead become lessees and lessors. Lessees who can acquire IPv4 blocks without upfront payments and lessors who can hold addresses while profiting from them. Naturally a lease market in IPv4 has evolved, but there are dangers to go along with the benefits of leasing.

Dangers of Leasing IPv4

For lessees:

  • Address suitability/invisible reputational problems-prior lessees may have utilized the range for similar purposes, rendering them unsuitable
  • Test period-some lessors will not allow a test period due to the volume of spam that could potentially be sent in that period, and the reputational damage that could occur if the lessee is a spammer
  • Internal blacklists-some blacklists are public but it’s increasingly a competitive advantage to have internal blacklists that your competitors can’t access. So there are more and more internal blacklists impossible to query without actually using the addresses
  • Minimum lease duration-if there is a minimum and the blocks are unsuitable, the lessee loses
  • Geolocation-geolocation is under the control of third parties who can’t guarantee that addresses will be geolocated properly or quickly, or that old geolocation information won’t persist in some locations
  • Route-ability-unless the lessee is peering, upstream ISPs control the ability to advertise and use the address block, and these ISPs are third parties with veto power over usability. Sometimes there are several levels of upstream providers whose permission must be gained.
  • LOA, ROA-Letters of Agency and Route Origination Authorities are required, sometimes both, before blocks can be advertised, with various unpublished requirements among upstream ISPs for approval of these
  • Upstream filters-Filters for BGP route advertisements block route propagation and must be lifted in order for leased blocks to be successfully routed. These filters are often manually created and edited, and often in the control of top network management who are often hard to find and reluctant to make changes.
  • Sustainability- Although blocks can be contractually leased for long terms, there is little recourse should a lessor choose to terminate the lease early and leaving the lessee to renumber. The lessor controls the registration of the block and can utilize those powers to terminate leases unilaterally.
  • Trust in lessor, trust in lease agreement- Due to the cost of litigation and the real possibility of cross-border disputes, it is usually not feasible to seek redress in court for failure to meet contractual obligations, making trust an important factor on both sides of the lease.

For lessors:

  • Reputational impairment- Blocks can become blacklisted very quickly, and frequent blacklisting can lead to an inability to clean the blocks
  • How to detect and remove internal blacklists-A lessee may have caused the block to be listed on an internal blacklist such as those maintained by certain websites or service providers like Netflix, who maintain a list of addresses used by proxies to bypass geofencing.
  • To allow rDNS or not-Some lessees ask for reverse DNS but in almost every case, rDNS is only required to send email.
  • Spam pays top dollar- Due to the inherent risk, leasing for the purpose of emailing carries the highest lease rates, but the lessor must decide whether the risk is worth the benefit.
  • Eyeball network users provoke copyright complaints-ISP users routinely download copyrighted material and the address owner will receive notifications of these.
  • Unauthorized use- Revoking space for any reason can be problematic, especially with bulletproof ISPs who ignore normal network requests.
  • Hijacks of revoked lease space by prior lessors- Prior lessors often have done the groundwork to make blocks usable, such as getting permission and filters removed by upstreams, and have an opportunity to easily begin using the space again without permission from the lessor.
  • AS0 availability- If the lessor has access to RPKI, in addition to advertising more discrete blocks, lessors can create ROAs with AS0, which effectively block route propagation.
  • VPN providers with no visibility of their customers- Lessees who provide VPNs have tenuous connections to their often transient customers who use VPNs to cover trails and provide anonymity. Often these users can provoke issues with port scans, probes, and other nefarious activity the lessee will be ignorant of.
  • Collections-Collecting overdue payments is a cost and can be difficult, especially for overseas lessees.
  • International money flows/costs- International payments carry wire fees and complications
  • Prepayments- Many risks can be avoided if the lessee prepays for the lease term, but discounts are expected
  • Inflexibility- Leased out addresses are effectively locked up, can’t be sold during lease term should conditions change to warrant that
  • Longer term leases for more income security are locked up longer- If the lessee is trustworthy, the longer the lease term, the longer the lessor is prevented from selling the addresses.

Should I Buy or Lease IPv4?

If you are someone looking to acquire IPv4, its best to know the situations and what you are looking for. Before fully committing to buying or leasing, you should reach out to an IP broker to learn more information. But below is what we would advise if you were looking to acquire IPv4.

  • Becoming a lessee instead of a buyer is advisable if capital is limited, a project is tentative, addresses need is time-limited, or addresses need to be changed or rotated.
  • Becoming a buyer is advisable if capital is available, need is durable, and addresses are perceived as appreciating.

If you are looking to capitalize on your IPv4, below is our recommendation of selling or becoming a lessor.

  • Becoming a lessor instead of seller is advisable if immediate cash is not required and you would prefer recurring income, if there is tolerance for reputational impairment, if there are no immediate plans to sell, and if appreciation in value is assumed.
  • Becoming a seller is advisable if upfront cash is preferred, if there is little market sophistication on the seller’s part or tolerance for reputational damage, and if further price appreciation is not assumed.

When it comes to buying vs. leasing IPv4, there is no wrong answer. You just need to find out what will work best for your situation and know the pros and cons.