Virtual Extensible LAN, VXLAN, is another layer 2 overlay network technology that came into existence to initially address particular problems:
•In massively scaled virtualized data centers, the 4096 VLAN limitation implied through a 12 bit long dot1q tag played a significant role to come up with a more scalable solution.

•The static nature of trunk provisioning is another key driver. One of the most attractive aspects of virtualization is the short deployment timelines brought by the simplified deployment of server workloads, but these were hampered by a slow network deployment time.

•Many of these virtual deployments require layer 2 adjacency of virtual machines, especially in clustered environments. The workload deployments preferably can be placed anywhere in the network irrespective of physical boundaries.

VXLAN initially was conceived as a host overlay technology as the basic function was executed at the hypervisor virtual switch layer.