Why IP addresses are critical digital capital for modern businesses

• Businesses increasingly regard IP addresses as strategic assets that enable connectivity, scalability and economic value.
• Structural scarcity, market dynamics and governance shape the capital value of IP addresses globally.

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IP addresses have evolved from technical identifiers into essential digital capital that underpins growth, security and strategic value for modern enterprises.

Also Read: What are IP addresses and why they are important?
Also Read: Why regional internet registries can’t fully control IP allocation

Introduction

For most people, IP addresses are invisible strings of numbers that quietly make the internet work. Yet for modern businesses, these numerical labels have become critical digital capital. They are the identifiers that allow devices and services to connect, data to flow and enterprises to operate at scale. As companies grow more dependent on cloud services, edge computing and global networks, IP addresses have moved beyond technical infrastructure into strategic economic territory.

This shift has been driven by scarcity, governance structures, market evolution and the role that IP addresses play in enabling revenue and connectivity. In this article we explore why IP addresses are now viewed as digital capital, how they deliver business value and what challenges remain as organisations integrate them into strategic planning.

Also Read: Lu Heng’s notes: A clear guide to the hidden mechanics of the internet

What an IP address actually is

An Internet Protocol address, or IP address, is a numerical label assigned to every device connected to a network that uses the Internet Protocol for communication. It functions much like a postal address in the digital world. Each IP address identifies a sender or receiver of data packets, enabling routers to move information from one point to another.

IP addresses come in two main flavours: IPv4 and IPv6. IPv4 uses a 32-bit space, allowing up to approximately 4.3 billion addresses, of which slightly over 3 billion are usable on the global public internet. IPv6 uses 128-bit addressing and offers a vastly larger pool of identifiers. However, both serve the same fundamental purpose: enabling devices to speak to servers, services and other endpoints.

This fundamental utility has traditionally been seen as a technical necessity rather than an economic asset. That view is now changing.

Also Read: Why the counter-argument on IP governance fails under real-world pressure

Why IP addresses act as digital capital

In economic terms, capital is anything that enables production or revenue. IP addresses clearly fit this definition for digital services. They enable cloud servers to host applications, they allow internet of things devices to transmit data, and they underpin the connectivity that digital business models depend on.

A recent industry analysis explains:

“IP addresses now meet all the conditions of capital including scarcity, utility, ownership dynamics and economic value.”

IP addresses are scarce. IPv4 space is finite and largely exhausted. IPv6 space is vast, but adoption remains incomplete. This scarcity gives existing addresses value beyond mere technical utility.

IP addresses also have utility that is essential to modern business operations. Without routable addresses, services cannot be reached, content cannot be delivered and customers cannot interact with digital platforms.

Finally, the existence of secondary markets where addresses can be traded or leased demonstrates clear economic value. Companies evaluate address holdings as assets, and those with large blocks can use them strategically for growth or monetisation.

Expert insights into IP as capital

Lu Heng, CEO at Cloud Innovation, CEO at LARUS Ltd and founder of the LARUS Foundation, has been one of the most vocal experts emphasising the economic importance of IP addresses. He has written extensively about how these resources have shifted from obscure technical identifiers to strategic capital.

In his analysis, Heng states:

“IPv4 addresses remain one of the most undervalued assets in the global digital economy. Their suppressed valuation is not accidental; it is structural.”

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

This structural undervaluation stems from governance and market constraints, which have historically treated IP addresses as administrative resources rather than capital assets.

Heng also highlights the practical impact of IP address holdings on business balance sheets:

“Every ISP’s balance sheet is affected by IPv4 holdings.”

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

His perspective underscores that IP addresses have material economic value, even if markets have not fully recognised them as traditional capital.

Also Read: Why IPv4 scarcity transforms IPs into investable assets
Also Read: Why protecting the number registry system has become a question of stability

Scarcity and its economic implications

The exhaustion of freely allocatable IPv4 addresses has been a defining feature of internet infrastructure for more than a decade. Regional Internet Registries (RIRs) no longer have large pools of free IPv4 space to distribute. Organisations that need additional addresses must source them through transfers, leases or secondary acquisition.

This scarcity has created a situation where the number of addresses available is limited, but demand continues to grow with every new internet-connected device.

Attribute	IPv4	IPv6
Address length	32-bit	128-bit
Usable address count	~3 billion	Virtually unlimited
Free allocation status	Exhausted	Ongoing
Typical monthly lease cost	~$0.30 per address	Variable, emerging

This scarcity means that businesses that secure sufficient address space can scale more easily, while those that lack it may face operational constraints or higher acquisition costs. Scarcity also elevates the strategic importance of IP addresses in corporate planning and investment decisions.

How businesses leverage IP capital

Cloud hosting and edge computing

For cloud providers and enterprises deploying applications at scale, IP addresses are essential. They allow servers to be reachable by customers, partners and machines. In edge computing scenarios, addresses become part of the infrastructure that reduces latency and improves performance for distributed applications.

IP address holdings can influence the cost structure for cloud deployments and may be factored into capacity planning.

Mergers and valuation

Large address holdings can influence the valuation of technology firms, especially internet service providers and carriers. Markets often assign intrinsic value to scarce, essential resources, which is why some analysts argue that IPv4 holdings already represent material percentages of telecom valuations.

In some cases, holdings that were obtained cheaply decades ago may now be among the most valuable assets on a company’s books in terms of scarcity and strategic importance.

Security and reputation

IP addresses also affect cybersecurity and reputation management. Certain blocks have histories linked to abuse, spam or botnet traffic. Poor reputation can reduce the utility of an address block and diminish its capital value. This human and operational dimension reinforces that IP addresses are more than numbers: they have histories and reputational footprints that matter to business outcomes.

Governance, ownership and market evolution

The governance of IP addresses is managed by regional bodies known as RIRs. These organisations allocate address space within defined geographic regions and maintain records of ownership or assignment.

However, RIR policies traditionally treat IP address holders as custodians rather than owners with full proprietary rights. This limits how addresses are recognised in financial terms, complicates transferability and suppresses liquidity in secondary markets.

For businesses, this governance model presents both challenges and opportunities. On one hand, it provides stability and a structured framework for allocation. On the other, the lack of clear ownership rights can hinder the efficient functioning of markets where capital value might otherwise be expressed more fully.

Structural barriers to capitalisation

Despite their economic importance, several barriers prevent IP addresses from being fully recognised as capital in the same way as other asset classes:

• Liquidity constraints: Secondary market trading volumes remain small relative to total address holdings, restricting price discovery and market depth.
• Governance ambiguity: Policies that treat addresses as administrative resources discourage traditional asset treatment.
• Transfer restrictions: Some registries impose conditions that slow or complicate transfers, even when resources are scarce.

These barriers contribute to a situation where IP addresses function as capital in practice, but are treated as administrative resources in policy.

The future of IP capital in business strategy

As the digital economy expands, the role of IP addresses as digital capital is likely to grow. Organisations need to recognise them not just as technical necessities, but as strategic resources that influence scalability, valuation, security and competitive positioning.

Some industry experts argue that reforming governance frameworks to enhance ownership clarity and market liquidity could unlock significant additional value. This could boost investment, improve transparency and align economic incentives with operational realities.

Moreover, as IPv6 adoption increases, hybrid approaches to address management may emerge, with IPv4 scarcity and IPv6 abundance coexisting in business strategies.

Table: IP address as capital vs traditional assets

Feature	IP address capital	Traditional capital (e.g. property)
Scarcity	High (IPv4)	Variable
Ownership clarity	Limited by policy	Clear legal title
Liquidity	Emerging markets	Established markets
Economic utility	Essential for connectivity	Diverse utility
Reputational impact	High (e.g. block history)	Variable

Frequently asked questions

1.What makes IP addresses ‘digital capital’?
IP addresses enable connectivity and revenue-generating services, have economic value and scarcity, and can be traded or leased.

2.Are IP addresses owned by businesses?
Governance frameworks treat addresses as allocated resources, not full proprietary assets, though markets create de facto ownership dynamics.

3.Why does IPv4 scarcity matter for businesses?
Scarcity means limited supply and sustained demand, raising strategic value and cost for address acquisition.

4.Can IP addresses be traded freely?
Secondary markets exist, but registry policies and limited liquidity can slow or restrict trade.

5.Will IPv6 replace IP address capital?
IPv6 reduces scarcity but does not immediately eliminate the strategic value that IPv4 holds in many networks.