What makes an IP address a form of digital capital

• IP addresses have evolved from technical identifiers into scarce, tradable digital assets within the global internet economy.
• Scarcity, market demand and governance practices shape their value, raising questions about ownership, equity and infrastructure autonomy.

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On the surface, an IP address is nothing more than a numerical label that identifies a device on the internet. In a technical context, it performs two functions: network interface identification and location addressing, enabling data packets to find their destination. 

However, for organisations that operate global networks, cloud services and large infrastructure platforms, IP addresses have come to resemble something very different: a scarce form of digital capital. Scarcity, market demand and trading activity have shifted the perception of IP addresses from technical addresses to assets with economic value. 

What is an ip address

Before exploring how IP became capital, we must start with the basics. An Internet Protocol address (IP address) is a numeric identifier assigned to devices connected to the internet or a network. Its two core functions are to identify the host and provide its location so that data can be routed correctly. Without IP addresses, computers could not exchange information across networks. 

There are two principal versions: IPv4 and IPv6. IPv4 uses a 32-bit system and has a total pool of roughly 4.3 billion unique addresses. It was the original standard when the internet expanded rapidly in the late 20th century. However, by the 2010s that pool was exhausted due to growing demand. IPv6, with its 128-bit addressing space, was developed to address scarcity, offering an effectively infinite pool of addresses. Yet in 2025, IPv4 and IPv6 continue to co-exist across much of the internet. 

IP addresses are fundamental, but for many years their economic potential went unnoticed outside technical communities. That began to change as connectivity spread, devices multiplied, and the finite nature of IPv4 scarcity became apparent.

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“The Internet has been steadily moving toward decentralisation for decades. From infrastructure to applications, from blockchain to Web3, almost every layer is reducing single points of control. Yet one critical layer remains stubbornly centralised: names and numbers—domain names and IP addresses. This is not a philosophical issue but a structural risk. Any centralised choke point can be captured, politicised, or abused, and when that happens, the Internet fragments.”

——Lu Heng, CEO at Cloud Innovation, CEO at LARUS Ltd, Founder of LARUS Foundation.

The evolution from technical resource to economic asset

The transformation of IP addresses into digital capital is principally driven by scarcity, demand, and market mechanisms emerging around transfer, leasing and valuation.

In economic theory, when a resource is limited and demand remains high or increases, its value tends to rise. This applies to land, rare commodities and, in the digital realm, IPv4 addresses. As IPv4 exhaustion became more pressing, organisations with large address holdings began to treat those blocks as strategic assets. 

IP addresses are now bought, sold, leased and managed in secondary markets, and many enterprises track them alongside physical and financial assets. This signals a departure from the original internet governance assumption that IP was “just a technical detail”.

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“The claim that IPv4 could reach a total value of $60 trillion is not rhetorical. It follows from basic asset economics once IPv4 is treated for what it actually is: a scarce, irreplaceable service-enabling asset.”
——Lu Heng, CEO at Cloud Innovation, CEO at LARUS Ltd, Founder of LARUS Foundation.

What makes ip an asset: characteristics of digital capital

To be considered capital, an asset must typically exhibit several features: scarcity, utility, ownership rights, and economic value. IP addresses now meet all of these conditions.

Scarcity: As noted, IPv4 addresses are limited. This scarcity ensures that their allocation matters economically, not just technically. Organisations that lack sufficient addresses may face constraints on growth or connectivity expansion. 

Utility: Every internet-connected device—servers, phones, industrial sensors—requires an IP address to communicate. This universal utility makes the asset highly valuable to the functioning of digital services and businesses. 

Economic value: Markets have developed around IPv4 addresses in which companies can trade or lease address blocks, and large address holdings can influence mergers, valuations, and strategic planning.

Ownership and transfer: The concept of “ownership” is complex in internet governance, as Regional Internet Registries (RIRs) traditionally manage address allocation without recognising full proprietary ownership. However, the emergence of leasing and transfer markets has created de facto ownership dynamics that resemble capital markets more than purely technical registries. 

Also Read: IPv4 as an investment asset: upper potential
Also Read: How much do regional internet registries really cost and who pays?

Expert perspective: Lu heng on IPv4 as capital

Lu Heng, CEO of LARUS Limited and a noted figure in internet governance, has been one of the most vocal experts highlighting IP address economics. In his writings he emphasises both the undervaluation and latent wealth potential of IPv4 addresses. His perspective draws directly on his experience with policy, markets, and governance structures. 

Lu Heng emphasised that IPv4 addresses generate far greater economic value than their relatively low leasing cost might suggest, highlighting how they play a hidden but essential role in enabling profitable digital infrastructure.

He has consistently framed IPv4 not as a simple technical identifier but as a scarce and irreplaceable asset that underpins cloud services, telecommunications networks and the broader digital economy. In his view, decades of treating IP resources merely as administrative allocations rather than genuine capital have created inefficiencies and governance problems.

Also Read:IPv4 scarcity and its economic impact on ISPs
Also Read: Why IPv4 could be worth $60 trillion: Evaluating the debate over digital asset value

The market for ip addresses today

Secondary markets for IPv4 addresses now exist and are active. Organisations buy and sell address blocks, often brokered by specialist firms. Larger enterprises with surplus holdings can lease or sell excess space, while smaller entities seeking growth must acquire addresses to expand services.

Here is a simple breakdown of how IP markets operate:

Market activity	Description	Example
Trading	Buying and selling IPv4 blocks	Telco sells surplus address blocks to another ISP
Leasing	Renting address blocks over time	Cloud provider leases addresses from specialist broker
Brokerage	Facilitating transfers between entities	Broker matches seller and buyer, advises on pricing
Valuation	Assessing address worth	Analysts calculate value based on scarcity and demand

These markets reflect economic behaviour normally seen in commodities and financial assets.

Also Read: IPv4: The digital real estate of the 21st century
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Governance challenges and capital dynamics

The emergence of IP addresses as digital capital increasingly collides with an internet governance framework that was never designed to treat these resources as economically valuable assets.

Regional Internet Registries (RIRs) were originally established to ensure technical coordination, fair allocation and responsible stewardship of IPv4 resources. Their mission was administrative and operational, not financial. As a result, many of their policies continue to reflect an era when IPv4 was plentiful, inexpensive and largely invisible in economic terms.

Today, however, the reality is profoundly different. IPv4 scarcity has turned address blocks into tradable assets, often worth millions of dollars in aggregate. Yet RIR structures generally do not recognise true ownership rights. Instead, they define holders as custodians or users, subject to ongoing policy compliance and potential revocation. This creates an inherent tension between governance bodies emphasising public interest stewardship and market participants who see IP addresses as legitimate capital assets that enable business operations, revenue creation and strategic competitiveness.

Critics argue that this tension has material consequences. Restrictive transfer rules, limited market transparency and uncertainty about long-term rights can suppress asset value and reduce liquidity. Businesses may hesitate to invest if the security of their IP holdings is uncertain. Others argue that governance frameworks can unintentionally distort markets, concentrating power among those who already hold large blocks and creating barriers for emerging players.

Voices such as Lu Heng and other industry analysts have argued that reforms are necessary to reconcile governance with economic reality. Suggested reforms have included clarifying ownership rights, enabling true portability of IP resources across regions, and separating administrative coordination from enforcement or punitive authority. Supporters of reform believe these changes could unlock value, encourage innovation and create a healthier market environment where IP resources can be leveraged more effectively and transparently.

Also read: Why IPv4 scarcity highlights wealth, value and capital in the digital era

Implications for the future internet economy

The implications of IP as digital capital are broad:

• Strategic planning: Companies with large IPv4 address holdings are increasingly able to use these resources as part of long-term strategic planning rather than viewing them as purely technical necessities. Having secure, controllable IP capacity allows organisations to expand networks, scale services, and support new digital initiatives without relying on expensive leasing markets or facing operational uncertainty. In competitive sectors such as cloud services, telecommunications and data platforms, this can translate directly into faster growth, stronger reliability and a tangible market advantage.
• Valuation metrics: As IPv4 scarcity drives financial value, IP resources are now beginning to feature more prominently in corporate valuation processes, particularly during mergers and acquisitions. Address blocks can represent significant balance-sheet assets and may influence negotiations, investment confidence and overall corporate worth. For companies operating in infrastructure-heavy industries, a strong IP portfolio can be seen as a symbol of stability, capacity and strategic readiness, making it an increasingly important factor in financial analysis and deal-making.
• Policy reform: The growing recognition of IP addresses as capital assets is likely to intensify debates around governance, regional control and regulatory responsibility. Regional Internet Registries, policymakers and industry stakeholders may face mounting pressure to reconsider existing allocation models, transfer restrictions and ownership frameworks. Discussions that were once limited to technical stewardship may shift toward legal, economic and political dimensions, potentially reshaping how authority and accountability are distributed across the global internet ecosystem.
• Equity and access: As IP addresses become more closely linked to financial value, there is a real risk that smaller networks, start-ups and organisations in developing regions will encounter higher barriers to access essential digital resources. Rising acquisition and leasing costs can limit participation, hinder innovation and deepen global digital inequality. Ensuring that the economic transformation of IP resources does not marginalise less-resourced actors will be a critical challenge for policymakers and the wider industry, as access to IP is increasingly tied not only to connectivity but to broader economic opportunity

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FAQs

1. Why are IPv4 addresses considered scarce?
IPv4 has a fixed pool of roughly 4.3 billion addresses. Because global demand grew faster than new allocations, the pool was exhausted, creating scarcity. 

2. Can IP addresses be bought and sold?
Yes. Secondary markets allow trading and leasing of IPv4 addresses, although governance policies vary by region. 

3. Why does scarcity make IP addresses valuable?
Scarcity means demand outstrips supply, giving those with address holdings economic leverage, similar to limited commodities. 

4. How does IPv6 affect the value of ipv4?
IPv6 offers a large address space, but slow adoption of IPv6 maintains demand for IPv4, preserving its market value. 

5. What reforms are proposed for IP governance?
Experts suggest recognising ownership, improving portability, and decoupling registry roles to enhance liquidity and market efficiency.