What is IP Address?

IP essentially stands for Internet Protocol and it is a set of rules that governs data distribution between devices connected to a local network or the internet. IP addresses are unique numeric addresses assigned to these devices. These addresses act as labels that carry information about the devices.

IP addresses provide the means to differentiate between various devices that are interconnected on the internet. In the crypto world, IP address awareness is essential to maintain privacy on the internet.

How Does IP Address Work?

The workflow of IP addresses can be divided into four main steps:

• Your device is connected to the internet through a network that is offered by an internet service provider (ISP).
• The ISP assigns a unique IP address to your device.
• Your internet activity is routed through the ISP.
• After your device’s compliance with the internet protocols is ensured, they route it back to you.

Note that this process happens in seconds.

What is the Classification of IP Addresses?

IP addresses are classified in two ways – by format and by type. There are two different formats and two different types of IP addresses.

The formats of IP addresses:

• IPv4 is a 32-bit format and it is a numeric addressing method that uses a dot (.) for the separation of its binary bits. It uses Address Resolution Protocol (ARP) to map IP addresses and offers 12 different headers.
• IPv6 is a 128-bit format and it is an alphanumeric addressing method that uses a colon (:) to separate its binary bits. It uses Neighbor Discovery Protocol (NDP) to map IP addresses and offers 8 different headers.

The types of IP addresses:

• The dynamic IP address is the address that is assigned to a device and then reassigned to another device when the first one loses access to the internet. This constant change makes your device more secure and harder to hack.
• The static IP address is a specific address assigned to a device that remains with that device. Static IP addresses are mostly used by businesses that host their own servers.

Crypto Privacy and IP Addresses

On-chain security and anonymity are essential things to consider when using cryptocurrencies. Without security and anonymity, your identity and personal information shared on an exchange or an IP address might become accessible to the public. Being recognized as a crypto trader might put you at risk, therefore, you should always consider on-chain privacy measures and avoid connecting your identity to your IP address.

How to Protect Yourself From Crypto Privacy Issues Associated with IP Addresses?

The best way to protect your personal information is using a Virtual Private Network (VPN) which reroutes your location to a different geological location. VPN services replace your unique IP address with their own which makes it impossible to find your location, personal information, and online activity.

Besides, stay away from crypto exchanges that lack on-chain protection measures. There's no reason to hide your IP address if your on-chain information is public. Though if the exchange does offer on-chain security measures, don’t ignore them.