Which technology do IaaS providers use to stretch a Layer 2 segment across a Layer 3 network?

VXLAN (Virtual Extensible LAN) is a tunneling protocol that encapsulates Layer 2 Ethernet frames within Layer 3 UDP packets. This allows a Layer 2 segment to be extended across a Layer 3 network, enabling virtual machines to migrate between different physical hosts in separate Layer 3 subnets while maintaining their IP addresses. IaaS providers widely use VXLAN to create large, scalable, multi-tenant cloud environments. VTEP (VXLAN Tunnel Endpoint) is a device that encapsulates and de-encapsulates VXLAN frames; it's a component of VXLAN, not the technology itself. VRF (Virtual Routing and Forwarding) creates multiple independent routing tables on a single router, isolating network traffic but not stretching Layer 2. VLAN (Virtual Local Area Network) segments a Layer 2 network but cannot stretch it across a Layer 3 boundary without additional protocols.