How are IPs and proxies made?

Data Center Proxies Versus Residential Proxies

To understand why residential proxies are worse at enabling fraud it's important to distinguish how they're different from data center or hosting service proxies.

Data Center Proxy: Uses the IP address of a server issued by a hosting company and are easily identifiable.

Residential Proxy: Uses residential IP addresses issued by an Internet Service Provider (ISP), often without the knowledge of the IP addresses' real owner. These connections are often generated by the user's device being infected with malware and connected to a botnet.

Let's talk about hosting and data center proxies. Without a proxy, you access a website from your computer. With a data center proxy, you access a website from the data center server. The datacenter proxy acts as an intermediary which protects your identity. The website sees the IP address of the data center instead of your own. Most bot detection solutions only focus on preventing data center IP addresses.

A residential proxy, on the other hand, uses an IP address that belongs to another residence. The other residence is the intermediary in this scenario. Unlike data center IP addresses, residential IP addresses are  seen as more legitimate to websites and usually do not raise any red flags. It's a matter of trust. An IP address is less likely to get flagged or banned if it's coming from a home connection. That's why residential proxies are more dangerous.

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