In a cloud environment, systems might be located in different Layer 2 networks. In such cases, creating virtual machines (VMs) or tenants over a Layer 2 network restricts the number of systems that you can use for provisioning these VMs. You can use systems in different Layer 2 networks for provisioning VMs. However, as the migration between different systems is restricted to the same Layer 2 network, the utilization of the physical resource is not optimized.
VXLAN is a Layer 2 technology that enables you to create a Layer 2 network on top of a Layer 3 network, thereby providing further network isolation. VXLAN provides a virtual Layer 2 network that stretches over multiple physical Layer 2 networks. Therefore, provisioning resources in a cloud environment is not restricted to a single physical Layer 2 network. Systems can be a part of a VXLAN network as long as they are connected by IPv4 or IPv6 networks. In Oracle Solaris, VXLAN technology is implemented through its Elastic Virtual Switch (EVS) feature.
VXLAN provides isolated Layer 2 segment that is identified by the VXLAN segment ID or VXLAN network identifier (VNI). All VMs in the same VXLAN segment belong to the same virtual Layer 2 broadcast domain.
Communication in VXLANs is similar to that in isolated VLANs. Hence, only VMs that are in the same VXLAN segment can talk to each other.