What Is an Overlay Network?

An overlay network is built on top of an existing network and its infrastructure. It interconnects the communication participants and nodes via logical connections. The overlay network provides a logical decoupling from the underlay network and its physical network infrastructure. An overlay network can be used to map virtual network structures and implement missing functionalities of the underlay network.

An overlay network is a logical network built on top of an existing network. It sits on top of an existing network, also called an underlay network, and uses its network infrastructure. The overlay network links the communication nodes and communication participants with logical or virtual connections. It usually uses protocols of higher OSI layers than those of the underlay network.

The logical network connections are decoupled from the physical network infrastructure of the underlay network, but use its data transport capabilities. Overlay networks are often used to implement missing functionalities or features of the underlay network at a higher OSI layer in the overlay network and to map other virtual network structures.

Address spaces, addressing and routing procedures are logically independent of the underlay network. The Internet, for example, originated as an overlay network of the telephone networks of telecommunications network operators. Today, the Internet itself forms the basis for many overlay networks such as virtual private networks (VPNs), peer-to-peer networks (P2P), content delivery networks (CDNs), voice over IP (VoIP) networks, the Internet of Things (IoT), and many more.

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Overlay networks work with techniques such as encapsulation or tunneling of data packets and form logical topologies that differ from the physical infrastructure of the underlay networks, such as meshed networks. Software-Defined Networking (SDN) can also be considered a form of overlay networking. It decouples the hardware from the software and separates the control of the network from the data forwarding plane.

Typical characteristics of an overlay network?

What Is an Overlay Network

The typical characteristics of an overlay network are:

  • Forms a logical or virtual network above the physical network infrastructure of the underlay network.
  • nodes and network subscribers are interconnected by logical or virtual links
  • a logical link can be based on many physical hops of the underlay network
  • implements features or functionalities of the underlay network that are missing at higher OSI levels
  • forms network topologies that are logically independent of the underlay network, such as mesh structures
  • uses its own address spaces, addressing and routing procedures
  • can form logical redundancies based on the underlay network
  • can provide its own multicast and broadcast mechanisms

Examples of overlay networks

The Internet itself was an overlay network in its early days. It provided international data connectivity based on the telephone networks of telecommunications network operators as an overlay network. Today, the telephone network itself is usually implemented as an overlay network in the form of Voice over IP (IP) based on the Internet. The Internet now forms the basis for many other overlay networks. These include, for example, the TOR network, virtual private networks (VPNs), peer-to-peer networks (P2P), content delivery networks (CDNs), the Internet of Things (IoT) and Internet television (IPTV).

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So-called software-defined networks (SDNs) are also a form of overlay networking. By conceptually decoupling hardware and software, they ensure the separation of the control and data forwarding layers of the networks. In principle, any network built on a Layer 1 or Layer 2-based infrastructure at higher OSI levels can be described as an overlay network. For example, enterprise IP networks are implemented as overlay networks of a switched copper or fiber optic underlay network infrastructure.