What is an Overlay Network?
An overlay network is a virtual computer network built on top of an existing network infrastructure. For example, an Internet VPN, which creates a virtual private line over the internet, is one type of overlay network. Other examples include CDNs (Content Delivery Networks), which optimize content delivery efficiency.
The primary purpose of an overlay network is to enable features or functions that the underlying network alone cannot achieve. For instance, in the case of Internet VPNs, security that might be difficult to guarantee on the native internet can be achieved through authentication and encryption technologies. Similarly, CDNs improve QoS (Quality of Service) for content delivery.
Recently, overlay networks have gained widespread attention as a method for implementing SDN (Software Defined Networking). Technologies like VXLAN (Virtual eXtensible Local Area Network) and NVGRE (Network Virtualization using Generic Routing Encapsulation) are prominent examples. These technologies build virtual Layer 2 (L2) networks on top of Layer 3 (L3) networks, extending the reach of a single L2 segment and facilitating operations such as virtual machine live migrations.