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What Is a Static IP Address?
A static IP address is simply your identifying mark on the Internet. When you connect to the Internet, your computer and connection are given a number to facilitate communication between you and other computers and servers that make up the Internet.
Most people are more concerned about the practical side, since an IP address effectively acts as a fingerprint that you leave on any website that you visit. All website administrators will have access to the information in the logs of their websites, and your Internet service provider could use this list to track down which sites you visit. For the most part, you will probably only run into issues with your IP address if you manage to get an IP ban on a website or forum. The possibility of being identified weighs heavy on some minds though.
This has probably hit Internet pirates (especially casual pirates) the hardest, since software and film companies have taken up capturing IP addresses from torrent networks and then filing lawsuits to get the real name and address of the user. The makers of "The Hurt Locker" had a very high profile case targeting tens of thousands of downloaders of the film (the case was eventually dropped).
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Does a Dynamic IP Address Help?
A dynamic IP address is used by some providers, which just means that you won't have one IP address for a long period. Sometimes simply restarting a router or unplugging the modem can net you a new IP address. Does this actually help protect your privacy though?
The short answer is no.
The only way a Dynamic IP will help is if you want to avoid IP bans. If you have a dynamic IP address, then it will be easy to get around any bans placed upon you. On the flip side, you may also stumble into bans that others have caused. I have heard of frustrated forum administrators banning entire country ranges just to shut down particularly bad trolls.
On the legal side, it doesn't really help at all. While you may be moving to a new address fairly often, you're leaving a forwarding address each time (to stretch a metaphor). If there is a legal issue or a lawsuit, your ISP will just look up who had the IP address at the queried time and make it available to courts.
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IP Addresses and Internet Privacy
I guess the real question is whether this is actually a problem or not. I would say that the average user has very little to worry about at the moment. As you may have noted, IP addresses have really only been linked with their real owners in legal matters. This is basically just the risk of piracy, so either stop pirating, accept the risk or find a suitable workaround.
The average person can't really do much with an IP address except run it through an IP lookup program. An IP lookup will only give the person's general area, operating system and web browser type. As I said, administrators will probably only bother to go through the logs if you manage to get yourself banned from the site, or they'll use the information to have a rough idea of where their traffic comes from and what browsers they use so that the website can be better optimized.
If you're very concerned about the issue, then you can look into using Tor, which is designed to hide your IP address. We have a full article on Tor's encryption methods if you're interested.
My final note would be that you should probably not even consider using a web proxy, unless you're the owner. Web proxies promise Internet browsing within a website, which effectively hides your IP address and makes it harder for anyone monitoring your connection to see what you're really doing. If you're actually concerned about your privacy though, note that the owner can see everywhere you went, when you went there and where you really are. This is coming from an ex-proxy owner too. Despite what they promise, they are far from the answer to Internet privacy.
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Source: Author's Own Experience
Official Tor Website: https://www.torproject.org/about/overview.html.en
Image Credit: Wikipedia Commons/Jcarranza