1. Introduction

In this tutorial, we’ll study the differences between the underlay and the overlay network. Networks and the Internet itself rely on multiple physical and logical resources to work properly. In summary, we can consider that these resources are maintained and provided in the overlay and underlay networks.

To understand the differences, similarities, and the relation between the underlay and overlay network, we’ll first take a look at background concepts regarding modern computer networks. Then, we’ll particularly explore some base concepts of underlay and overlay networks and check some examples. Finally, we’ll compare these concepts in a systematic summary.

2. How Modern Networks Work

Modern networks are complex and require lots of physical and logical resources to work as expected. In the core network, we find different equipment, typically called physical appliances. These appliances deal with network traffic forwarding. Making data move from one point to another is the fundamental task and objective of networking.

Furthermore, several networking protocols are processed in the previously presented context (typically called the core network). The most essential for making data transferred in a network are related to the lower layers of the OSI model. Prominent examples follow:

On the top of the core network, we have multiple servers working to provide data and services. These services employ other networking protocols that usually are not immediately related to the transmission of data in a network but to how to read and process these data already in their destination point.

These protocols, however, are included at the higher layers of the OSI model, so-called the software layers: session, presentation, and application layers. Examples of such protocols are Hypertext Transfer Protocol (HTTP), File Transfer Protocol (FTP), and Simple Mail Transfer Protocol, among others.

3. The Underlay Network

In summary, the underlay network means all the physical infrastructure that enables frames and packets to be forwarded from o one point to another. In other words, we can understand the underlay networks as the “place” on which it is possible to connect and communicate with networking devices.

Among the devices of the underlay network, we can cite switches, routers, and the cable plant infrastructure. So, we can see the underlay network as the available network topology.

In this way, as commented in the previous section, the underlay network refers to the core network, thus taking place in the first three layers of the OSI model: physical, data link, and network.

Furthermore, we can assume that the fourth layer of the OSI model (transport) has some characteristics that include it in the core network. However, this layer actually works as a transition layer between the underlay network and the overlay network.

The following image depicts a network topology and highlights aspects that make it the underlay network at all:


A big challenge regarding the underlay network is its mobility and scalability. In most cases, the underlay network is hardware orchestrated. Thus, it becomes hard to reorganize the network topology and add new nodes due to the necessity of physically working with network equipment.

However, new networking paradigms, such as Network Function Virtualization and Software-Defined Networks, aim to move the underlay network from its traditional hardware plane to a software plane. The objective of these paradigms is to improve the flexibility of the underlay networks.

Finally, it is relevant to highlight that the protocols that enable underlay networking are mostly related to ethernet switching, routing, etc.

4. The Overlay Network

In short, overlay networks provide software-driven transportation of network traffic, operating over the underlay network and abstracting low-level details of traffic forwarding. Basically, we can say that overlay networks implement the concept of virtual networks.

We can define virtual networks as an abstraction of the resources provided by the underlying network. So, the same physical infrastructure can be employed to build different virtual networks (i.e., creating virtual networks does not demand changing the underlay network).

In this way, the overlay network enables operators and managers to use the same network infrastructure to create multiple logical networks or even to create a virtual network over the Internet, connecting devices deployed in different physical networks.

The following image shows a representation of overlay networks built in a pre-existing underlay network:


There exist multiple protocols employed to do the transportation of data in overlay networks. Among the most famous of them, we have the layer 2 and layer 3 (OSI model) tunneling ones:

  • VXLAN: an encapsulation protocol to extend data link connectivity (virtual) over an underlying network layer (physical)
  • GRE: an encapsulation protocol that enables point-to-point communication between hosts in a public network (such as the Internet)
  • IPSec: a protocol that secures communications in an overlay network. It enables, for instance, data authentication, confidentiality, and integrity

Considering the previously presented protocols, we can create different types of virtual networks. We can cite Virtual Private Networks (VPN) and Virtual Local Area Networks (VLAN) as relevant examples.

It is important to highlight that, as the overlay networks are software-based, they are much more flexible than a hardware alternative. Thus, altering the abstract network topology of a virtual network is not as challenging as it is in the context of underlying networks.

However, virtual networks usually impose additional processes to enable traffic forwarding. Examples are encapsulation and cryptography processes. These processes may represent a series of overheads that may increase the latency and decrease the throughput in a networked system.

5. Systematic Summary

With the popularization of networks, their infrastructure became more and more complex to accomplish the requirements of different users. So, nowadays, networks are a sophisticated mix of software and hardware resources enabling data exchange and service provision.

The concepts of underlay and overlay networks got forged to organize and create a clear frontier between the networks’ physical and virtual environments.

The underlay network means all the physical infrastructure that supports traffic forwarding from one point to another. It includes all the network function equipment, besides the cables and other means of transmission used to communicate them. Thus, when we talk about the underlay network, we talk about — mostly — the first three layers of the OSI model (and the fourth layer, in some aspects).

The overlay network, in turn, represents an abstraction layer over the underlay network. With this layer, we can create virtual networks direct connecting machines that are not in the same physical network. A relevant concept in this context is tunneling, which means transmitting private data over a public infrastructure, guaranteeing its security, privacy, and integrity.

The following table summarizes and compares some characteristics of underlay and overlay networks:

Rendered by QuickLaTeX.com

6. Conclusion

In this tutorial, we studied underlay and overlay networks. At first, we got a brief review of how modern networks work. Thus, we specifically explored the characteristics of both underlay and overlay networks. Finally, we outlined the investigated concepts and compared underlay and overlay networks in a systematic summary.

We can conclude that the underlay networks are essential to enable communication — and the Internet as a whole — to happen in the digital world. However, overlay networks became a crucial resource to properly organize these communications, making it possible to create virtual networks and connect different network infrastructures as a single one.

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