Which characteristic describes VXLAN?

VXLAN (Virtual Extensible LAN) uses VTEPs (VXLAN Tunnel Endpoints) to encapsulate Layer 2 Ethernet frames into UDP packets. These VTEPs are responsible for adding the VXLAN header and the outer UDP/IP header before sending the encapsulated traffic across the underlay network. Upon reaching the destination VTEP, the process is reversed (de-encapsulation) to deliver the original Layer 2 frame. This mechanism allows for the creation of virtual Layer 2 networks over a Layer 3 underlay. Incorrect options: "Has a 12-bit network identifier" is incorrect. VXLAN uses a 24-bit VXLAN Network Identifier (VNI), allowing for millions of unique virtual networks, a significant improvement over VLAN's 12-bit ID. "Uses TCP for transport" is incorrect. VXLAN uses UDP (User Datagram Protocol) for transport, specifically UDP port 4789. "Extends Layer 2 and Layer 3 overlays over a Layer 2 underlay" is incorrect. VXLAN primarily extends Layer 2 overlays over a Layer 3 underlay. While it can be integrated with Layer 3 VPNs, its fundamental purpose is Layer 2 extension over Layer 3.