Network Overlay Protocols(1) — GRE/VXLAN/LISP
🔍 Understanding Modern Network Encapsulation
“They look similar, but their purpose, header structure, and encapsulation scope are completely different.”
In this post, we break down howGRE,VXLAN, andLISPdiffer in what they encapsulate, which headers they generate, and what problems they are designed to solve.
① Overview
Modern overlay protocols abstract networks into flexible, virtualized layers.
Although GRE, VXLAN, and LISP all use encapsulation, their design goals are entirely different:
- GRE — traditional L3 tunneling
- VXLAN — L2 extension over L3 underlay (DC standard)
- LISP — EID/RLOC separation for scalable, mobile, multi-site routing
② GRE — Generic Routing Encapsulation
GRE provides a simple form of IP-over-IP tunneling.
It’s widely used to run routing protocols (OSPF, EIGRP) across WAN or public networks.
Figure 1. GRE Header and Encapsulation.
✔️ Header creation
- New L2 header: No
- New L3 header (Outer IP): Yes
- GRE header: Yes
✔️ Encapsulation scope
- Typically the entire L3 packet (IP packet)
- Can encapsulate L2, but rarely used this way
✔️ Purpose
- Basic tunneling (IP-in-IP)
- Site-to-site connectivity
- Carry routing protocols over untrusted or simple IP networks
- No security on its own (combine with IPsec)
✔️ Typical architecture
- Private WAN
- Site-to-site tunnels
- Cloud ↔ On-prem hybrid routing
③ VXLAN — Virtual Extensible LAN
VXLAN is the modern data center standard for extending L2 domains over an L3 IP underlay.
Figure 2. VXLAN Header and Encapsulation.
✔️ Header creation
- New L2 header: Yes (Inner Ethernet preserved)
- New L3/UDP header (Outer IP + UDP): Yes
- VXLAN header: Yes
✔️ Encapsulation scope
- Entire Ethernet frame (L2 + L3 + payload)
- Allows L2 to “ride” over L3 fabric unchanged
✔️ Purpose
- L2 domain extension at massive scale
- EVPN multi-tenant architecture
- Overcomes VLAN limit (4094) → VXLAN VNI supports 16 million segments
- VM/container mobility across DC fabric
✔️ Typical architecture
- Spine–Leaf data centers
- EVPN VXLAN fabrics
- Private underlay L3 IP networks
④ LISP — Locator/ID Separation Protocol
LISP separates a device’s identifier (EID) from its routing locator (RLOC).
This enables scalable multi-site routing, mobility, and WAN-level optimization.
Figure 3. LISP header and Encapsulation.
✔️ Header creation
- New L2 header: No
- New L3 header (Outer RLOC IP): Yes
- LISP header: Yes
✔️ Encapsulation scope
- Entire L3 packet (EID-based)
- Not meant for L2 extension
✔️ Purpose
- Separate identity (host) from location (network)
- Support mobility
- Enable multi-homing across providers
- Reduce global routing table size
- Foundation for SD-WAN overlay architectures
✔️ Typical architecture
- SD-WAN
- Multi-site WAN interconnect
- Internet-across overlays
- Cloud ↔ On-prem routing abstraction
⑤ Comparison Summary
A clean comparison of GRE, VXLAN, and LISP using the six requested criteria:
| Category | GRE | VXLAN | LISP |
|---|---|---|---|
| 1. New L2 header? | No | Yes ⭐️ | No |
| 2. New L3 header? | Yes | Yes | Yes |
| 3. Custom header? | GRE Header | VXLAN Header | LISP Header |
| 4. Encapsulation scope | L3 packet | Full L2 Ethernet frame | L3 packet (EID) |
| 5. Purpose | Basic tunneling / routing transport | L2 extension / EVPN / DC overlay | ID–Locator separation / SD-WAN / global scalability |
| 6. Typical architecture | WAN, Site-to-Site | DC Spine–Leaf, EVPN | SD-WAN, multi-site, Internet overlay |
⑥ Practical Notes
- GRE = “Classic IP-in-IP tunnel”
- VXLAN = “L2 expansion over an L3 data center fabric”
- LISP = “Internet/WAN-scale routing abstraction via ID–Locator split”
In one line:
GRE connects, VXLAN extends, LISP abstracts.
⑦ TL;DR
| Goal | Recommended Tech |
|---|---|
| Simple IP tunneling | GRE |
| Large-scale L2 extension | VXLAN |
| Mobility, SD-WAN, multi-site routing | LISP |
📚 References
- RFC 2784 — GRE
- RFC 7348 — VXLAN
- RFC 6830 — LISP
- Cisco EVPN VXLAN Design Guide
- Cisco SD-WAN & LISP Architecture