layer 2 versus layer 3

[kendalle01]

I am researching frame relay for our organization and am a little confused by VPN methods. What is the difference between establishing a VPN connection at layer 2 versus layer 3?

[thisisshanky]

Frame-relay provides a private wan between central office and branch offices and is very scalable. But recurring costs on circuits can be high. To avoid costs you can have local internet connections at each office and run VPN over the internet. This is basically an IPSEC VPN or IPSEC over GRE type VPN or a DMVPN - all three runs on layer 3 which means they need a peer (layer 3) IP address to terminate VPN connection.

There are many types of Layer 2 type VPN connection, especially PPTP and L2TP. For ex: you can do a site to site PPTP tunnel between two microsoft servers.

All the above, uses encryption to secure the packets traversing the VPN. Yet another technology that is becoming hot in the market is MPLS VPN. Usually you have to rely on a service provider with an MPLS backbone to connect multiple offices via MPLS VPN. MPLS VPN's necessary need not carry encrypted traffic. You can read more about MPLS here.

http://www.cisco.com/univercd/cc/td/doc/product/software/ios120/120newft/120t/120t5/vpn.htm