4.7 Introduction to IP Addressing (IPv4, IPv6)

Introduction: The Postal Service of the Digital World

In any business, communication and location are key. To send a package to a client, you need their precise physical address. In the digital world, computers and devices communicate in the same way, but instead of a physical address, they use an IP Address (Internet Protocol Address).

An IP address is a unique numerical label assigned to each device connected to a computer network that uses the Internet Protocol for communication. Just like a postal address ensures a letter reaches the correct recipient, an IP address ensures that data packets are sent to and received by the right device on a network. For a business, understanding IP addressing is fundamental because it underpins every single online activity—from sending an email to processing a customer payment or managing inventory across multiple locations.

Detailed Content: Understanding IP Addresses

What is an IP Address?

An IP address serves two primary functions:

  1. Host or Network Interface Identification: It uniquely identifies a specific device on a network.
  2. Location Addressing: It specifies the location of the device in the network, thereby establishing a path for data to travel.

Every device that connects to the internet or a local business network—your computer, smartphone, the office printer, a server, or a security camera—has an IP address.

IPv4 (Internet Protocol version 4)

IPv4 is the fourth version of the Internet Protocol and has been the dominant protocol for most of the internet’s history.

  • Structure: It is a 32-bit address, which means there are 2³² (approximately 4.3 billion) possible unique addresses.
  • Format: It is written as four blocks of numbers, each ranging from 0 to 255, separated by periods.
  • Example: 192.168.1.10 or 202.51.74.12

The Problem: IPv4 Address Exhaustion With the explosion of internet-connected devices (laptops, smartphones, smart TVs, IoT devices), the 4.3 billion addresses available under IPv4 are not enough. This scarcity of addresses led to the development of IPv6.

IPv6 (Internet Protocol version 6)

IPv6 is the most recent version of the Internet Protocol, designed to solve the problem of IPv4 address exhaustion.

  • Structure: It is a 128-bit address, providing a vastly larger address space—approximately 340 undecillion (3.4 x 10³⁸) addresses. This is enough to give multiple IP addresses to every grain of sand on Earth.
  • Format: It is written as eight groups of four hexadecimal digits, separated by colons.
  • Example: 2001:0db8:85a3:0000:0000:8a2e:0370:7334

Key Advantages of IPv6 for Business:

  • Vast Address Space: Eliminates the complexity of managing scarce IPv4 addresses and supports the growth of the Internet of Things (IoT).
  • Enhanced Security: IPv6 has built-in security features, most notably IPsec (Internet Protocol Security), which provides authentication and encryption.
  • Improved Efficiency: A simplified packet header makes routing more efficient and improves performance.

Types of IP Addresses

IP addresses can be categorized based on their accessibility and assignment method.

1. Public vs. Private IP Addresses

  • Public IP Address: This is a globally unique address assigned to a device by an Internet Service Provider (ISP). It is used for communication on the public internet. Your company’s main router that connects to the ISP has a public IP address.
    • Business Use: Hosting a public website, an email server, or providing external access to company resources.
  • Private IP Address: This is an address used within a private, local network (like your office or home LAN). These addresses are not routable on the public internet and are used for internal communication between devices.
    • Common Private Ranges: 10.0.0.0 to 10.255.255.255, 172.16.0.0 to 172.31.255.255, and 192.168.0.0 to 192.168.255.255.
    • Business Use: Assigning addresses to employee computers, office printers, internal servers, and security cameras within the office network.

2. Static vs. Dynamic IP Addresses

  • Static IP Address: A static IP address is fixed and does not change. It is manually configured for a device.
    • Business Use: Essential for devices that need to be consistently accessible, such as web servers, email servers, and network printers. A business that hosts its own website needs a static IP so that its domain name can always point to the correct address.
  • Dynamic IP Address: A dynamic IP address is temporary and is automatically assigned to a device by a DHCP (Dynamic Host Configuration Protocol) server. These addresses can change each time the device connects to the network.
    • Business Use: Most common for client devices like employee laptops and smartphones. It is more efficient and cost-effective to manage a large number of devices this way.

Business Applications of IP Addressing

IP addressing is not just a technical detail; it is the foundation for nearly all modern business operations.

  • Finance:
    • Secure Banking: Banks often require corporate clients to access their secure portals from a whitelisted static IP address. This adds a layer of security, ensuring that sensitive financial data can only be accessed from the company’s office network.
    • Payment Gateways: When a business integrates a payment gateway like eSewa or Khalti, their server communicates with the gateway’s server using public IP addresses to securely process transactions.
  • Human Resources (HR):
    • Remote Work & VPNs: When employees work from home, they use a Virtual Private Network (VPN) to securely connect to the company’s internal network. The VPN assigns the employee’s remote computer a private IP address, making it seem as if it’s physically in the office.
    • Attendance Systems: Biometric and card-based attendance systems are network devices with their own IP addresses. The HR department connects to these devices via the internal network to pull attendance data.
  • Marketing:
    • Website Hosting: The company website is hosted on a server with a static public IP address. The domain name (e.g., www.mycompany.com.np) is linked to this IP address via the Domain Name System (DNS).
    • Geo-IP Targeting: Marketing teams use Geo-IP databases to determine a website visitor’s geographical location based on their public IP address. This allows them to show location-specific content, advertisements, or currency (e.g., showing prices in NPR for visitors from Nepal).
  • Operations & Supply Chain:
    • Multi-Branch Connectivity: A business with multiple branches (e.g., a bank or retail chain) uses IP networking to connect all locations. Each branch has its own local network (using private IPs), and they are securely connected over the internet.
    • Internet of Things (IoT): In a warehouse or factory, IoT devices like inventory scanners, temperature sensors, and automated machinery each have an IP address (increasingly IPv6). This allows for real-time monitoring and management of the entire supply chain.

Real-World Examples from Nepal

  1. Nepalese Banks (e.g., Nabil Bank, NIC Asia) and Network Security
    • Scenario: Nepalese commercial banks operate extensive networks connecting their headquarters, data centers, and hundreds of branches across the country.
    • IP Addressing in Action:
      • Each branch office uses a private IP address range (e.g., 10.10.x.x) for its internal computers, printers, and ATMs. This keeps internal traffic separate and secure.
      • The bank’s public-facing services, like its website and mobile banking app (e.g., Nabil SmartBank), are hosted on servers with static public IP addresses. This ensures customers can always reach them.
      • For high-value corporate clients, the bank often implements IP whitelisting, allowing access to their corporate banking portal only from pre-approved static public IPs belonging to the client’s office. This is a critical security measure in the finance sector.
  2. Internet Service Providers (e.g., WorldLink, Vianet) and IP Allocation
    • Scenario: ISPs in Nepal are rapidly expanding their user base, connecting millions of homes and businesses to the internet.
    • IP Addressing in Action:
      • For most residential customers, ISPs like WorldLink use DHCP to assign a dynamic public IP address. This is cost-effective as they can reuse addresses from a pool when users are offline.
      • For business clients that need to host servers or require stable remote access, they offer packages with a static public IP address at a higher price.
      • Due to IPv4 exhaustion, Nepalese ISPs are actively deploying IPv6. This allows them to provide unique IP addresses to the growing number of devices in every household and business, especially with the rise of smart home devices and IoT.
  3. E-commerce and Digital Wallets (Daraz, eSewa, Khalti)
    • Scenario: Platforms like Daraz and eSewa handle millions of transactions and user requests daily. Their availability and performance are critical.
    • IP Addressing in Action:
      • Their entire infrastructure (web servers, database servers, API endpoints) runs on servers with static public IP addresses, ensuring reliability.
      • They heavily use Geo-IP location services. When you visit Daraz from Nepal, your IP address is used to show you the Nepali storefront with pricing in NPR.
      • For fraud detection, these services log the IP address of every transaction. If a single account shows rapid login attempts from different IP addresses in geographically distant locations (e.g., Kathmandu and New York within minutes), it is flagged as a potential security breach.

Key Takeaways

  • An IP address is a unique numerical identifier for a device on a network, essential for all digital communication.
  • IPv4 is the older 32-bit system with a limited number of addresses, leading to its exhaustion.
  • IPv6 is the new 128-bit system, offering a nearly limitless supply of addresses and better security, crucial for the future of IoT and business growth.
  • Public IPs are for internet-facing communication, while Private IPs are for internal, local networks.
  • Static IPs are fixed and necessary for servers and services, while Dynamic IPs are temporary and efficient for client devices.
  • Understanding and managing IP addresses is fundamental to business operations, security, marketing, and finance in the modern digital landscape.

Review Questions

  1. Why was it necessary to develop IPv6, and what is its most significant advantage for businesses looking to adopt IoT devices?
  2. Your company is setting up a new office. Describe which type of IP address (Public/Private and Static/Dynamic) you would recommend for the following devices and justify your choice:
    • The main web server hosting the company’s public website.
    • An employee’s laptop used for daily work.
    • The network printer shared by all employees in the office.
  3. Explain how a digital wallet service like Khalti or eSewa might use a customer’s IP address for both marketing and security purposes.