In a network, each node in the network must have its own unique address in order to distinguish itself from the others. If you wish, the IP address can be associated to some other unique identifier in real life - for example the street name or a person's phone number. In the same way that a phone number points to a person, an IP address points to a specific node inside a network.

IP addresses are created by IANA (the Internet Assigned Numbers Authority) and they're all under its management. IANA is the top level management institution. It usually allocates super-blocks to Regional Internet Registries, who in turn allocate smaller blocks to ISP's and other enterprises. The ISP's distribute individual IP addresses or subnets to their clients.

Currently, the Internet Protocol has two versions. IPv4 and IPv6. The sole term of "IP address" refers to the IPv4 one.

Internet Protocol version 4 is the fourth iteration of the Internet Protocol IP and it is the first version of the protocol to be widely deployed. IPv4 is the dominant network layer protocol on the Internet and apart from IPv6 it is the only protocol used on the Internet. On the other hand, (IPv6) is a network layer protocol for packet-switched internetworks. It is designated as the successor of IPv4, the current version of the Internet Protocol, for general use on the Internet.

The main advantage of IPv6 is that is increases the number of available IP addresses and that can be revealed by a simple math. IPv4 supports 2^32 addresses - an estimated number of 4.3 billion. That's far from enough in order for everyone to have their own IP address. On the other hand, IPv6 brings up 2^128 addresses - totaling 340 billion billion billion billions addresses. If this would be used all over the Internet, NAT will not be required anymore.

As written above, IPv4 has a 4.3 billion addresses limit and that's due its 32 bit structure. Those are not all available for public use. About 18 millions of them are for special purposes (private networks, local connections and such), not visible from the Internet cloud. Another million is translated in multi cast addresses and the number of available IP addresses drops even more.

The main thing that slows this IP address shortage is NAT (Network Address Translation), a feature that helps computers in a local network connect to the Internet Cloud and vice-versa. This is the main limitation that helped stimulating the migration towards IPv6. IPv6 is now in the early stages of deployment and is currently the only protocol that could successfully replace IPv4. And that's only a matter of time from now.

Besides NAT, there are a few other practices that help minimizing the IP address exhaustion:

* Private networks

* Dynamic Host Configuration Protocol (DHCP)

* Named based virtual hosting

* Network renumbering

It's being predicted that the unallocated IANA IP address pool will be terminated somewhere in the first half of 2010.