IP Address

What Is an IP Address?

An IP address is a unique numeric address assigned to devices connected to the internet or a local network. The term “IP” stands for “internet protocol,” which refers to the set of rules and regulations governing data communication between devices on a network or over the internet. In the realm of cryptocurrency, it is crucial to be aware of your IP address in order to maintain online privacy.

Essentially, IP addresses serve as labels that aid in locating devices and facilitating the flow of data among them on a network. These labels contain local information and make accessibility more convenient.

The internet requires a means of distinguishing between different interconnected devices, and IP addresses provide the necessary mechanism to do so. They are an integral part of the internet’s structure.

How Does an IP Address Work?

• Your device connects to the internet through a network provided by an internet service provider (ISP) that grants you internet access.

• The ISP assigns a specific IP address exclusively to your device.

• Your internet activity passes through your ISP as they provide you with an internet connection.

• After ensuring compliance with internet protocols, your ISP routes the data back to you. IP addresses are also used for censorship of specific content or websites in certain countries.

Classification of IP Addresses

IP addresses can be classified into two domains: formats (IPv4 and IPv6 protocols) and types (dynamic and static). Let’s explore them further!

• IPv4 and IPv6 are the two formats of IP addresses. IPv4 is a 32-bit format that allows for up to 4,294,967,296 combinations. It is a numeric addressing method that uses a dot (.) to separate its binary bits. It consists of 12 headers and utilizes the Address Resolution Protocol (ARP) to map IP addresses.

• With the growth of the internet and the cryptocurrency industry, the number of devices connected to the internet is increasing exponentially. To meet the demand for IP addresses, a new format called IPv6 was introduced in 1998. IPv6 is a 128-bit format that provides 2^128 (340,282,366,920,938,463,463,374,607,431,768,211,456) addresses. It is an alphanumeric addressing method that uses a colon (:) to separate its binary bits. It consists of 8 headers and utilizes the Neighbor Discovery Protocol (NDP) to map IP addresses.

• There are two types of IP addresses: dynamic and static. Dynamic IP addresses are not specific to one user. Internet service providers assign specific addresses to each connected device, which are then reassigned to other devices when the previous ones lose internet access. This constant change of IP addresses makes it more difficult for criminals to hack into your network interface. Static IP addresses, on the other hand, remain consistent and are mainly used by businesses that want to host their own servers.

IP Addresses and Crypto Privacy Problems

When using digital currencies, the main concern is on-chain security and maintaining privacy. Without proper on-chain security, sharing your private details on an exchange or address can expose your identity and personal information to the public on the blockchain. Therefore, in addition to on-chain privacy, it is important to decouple your IP address from your identity when using cryptocurrency. IP privacy becomes crucial in situations where being recognized as a crypto trader can put you at risk, especially in authoritarian states.

How to Protect Yourself From Crypto IP Privacy Issues?

• Do not overlook on-chain security measures. If your on-chain information is public, there is no good reason to conceal your IP address. Avoid sharing your personal information with crypto exchanges that lack proper on-chain protection measures.

• The most effective way to protect your data is by using a virtual private network (VPN). Whether you are accessing a crypto exchange or not, it is advisable to use a VPN connection to prevent major hacks. If you are wondering what a VPN is, it is a network where your location is redirected to a different geographical area. This makes it impossible for your internet service provider to track your online activities. By using a VPN, you replace your unique IP address with one provided by the VPN service, ensuring that your location, personal information, and sensitive details cannot be traced through your IP address.