A Layer 3 switch is a high-performance device for network routing. It is relatively new term, was conceived as a technology to improve on the performance of routers used in large local area networks (LANs).
It can support the same routing protocols as network routers do. Both inspect incoming packets and make dynamic routing decisions based on the source and destination addresses inside.
It is designed to handle high-performance LAN traffic, so Layer 3 switch can be placed anywhere within a network core or backbone, easily and cost-effectively replacing the traditional backbone router.
The switches run routing protocols, such as open shortest path first (OSPF) or routing information protocol (RIP), to communicate with other Layer 3 switches or routers and to build their routing/forwarding tables. These tables are looked up to determine the route for an incoming packet
a Layer 3 switch can reprogram the hardware dynamically with the current Layer 3 routing information. This is what allows much faster packet processing.
The key difference between Layer 3 switches and routers lies in the hardware technology used to build the unit. The hardware inside a Layer 3 switch merges that of traditional switches and routers, replacing some of a router's software logic with hardware to offer better performance in some situations.
In general-purpose routers, packet switching takes place using a microprocessor, whereas a Layer 3 switch performs this using application-specific integrated circuit (ASIC) hardware.
Another differentiating feature between a router and a Layer 3 switch is the number of ports to which individual terminal devices can be connected. A Layer 3 switch usually has a significantly greater port density.
Layer 3 switches often cost less than traditional routers
The principle of a Layer 3 is "route once, switch many".
A Layer 3 switch can actually store MAC to IP Address associations for the source and destination of the packet.
when there is a packet with a new source destination pair, it is routed (which means that the routing table is referred to for determining the best path ) which is time consuming, and this source destination pair information is stored in the router cache.
when the next packet arrives with the same source destination pair, no routing lookup is needed and the packet is directly switched (which is much faster).
The benefits of layer 3 switching include the following:
Hardware-based packet forwarding
High-performance packet switching
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Do Layer 3 Switches Completely Eliminate Need for the Traditional Router
Routers are still needed, especially where connections to the wide area are required. Layer 3 switches may still connect to such routers to learn their tables and route packets to them when these packets need to be sent over the WAN.
The switches will be very effective on the workgroup and the backbone within an enterprise, but most likely will not replace the router at the edge of the WAN .