How does the VXLAN protocol work

The VXLAN is one of the overlay network tunneling protocols that is used to built network infrastructure for cloud environment. Below are some details about the operation and specification.

• Frame headers definition

• The traffic between VMs is encapsulated in IP/UDP packets
• Logical isolation is implemented in a form of logical overlay where the traffic is exchanged between encryption tunnels endpoints
• VXLAN ID is used to identify the specify isolated L2 cloud network that belongs to a tenant
• The tunnel endpoints represent the edge of the cloud network infrastructure
• The tunnel endpoints perform encapsulation and decapsulation
• It is there where all the logic is implemented to find out where to sent next a packet or to witch VM the packet should be delivered after decapsulation

• A comprehensive summary and operational features can be found under the links in reference section, below are few of the main characteristics and benefits:
• It operates over IP and used UDP to carry payload 
• Multicast support is the only other requirement for switches and routers to support VXLAN 
• Multicast is used to handle L2 broadcast traffic (like ARP requests)
• Logical networks can be extended among virtual machines placed in different Layer 2 domains

References

1. http://www.definethecloud.net/vxlan-deep-dive
2. http://www.definethecloud.net/vxlan-deep-divepart-2
3. http://www.cisco.com/en/US/prod/collateral/switches/ps9441/ps9902/white_paper_c11-685115.html
4. http://www.emulex.com/artifacts/d658610a-d3b6-457c-bf2d-bf8d476c6a98/elx_wp_all_VXLAN.pdf
5. http://blogs.cisco.com/datacenter/more-vxlan-qa/
6. http://blog.scottlowe.org/2011/12/07/revisiting-vxlan-and-layer-3-connectivity/
7. http://blog.scottlowe.org/2011/12/22/otv-and-vxlan-layer-3-connectivity-compared/