> Alternatively, you could create a virtual network/link within 
> the physical host, 

This is precisely what machine virtualization already does. And many
setups involve a set of physical hosts providing resources, and a set of
virtual machines consuming resources. A management system migrates the
virtual machines from host to host as it tries to make the best use of
the resources. At any given point in time, the only way to truly know
what virtual machines are on a given physical host is to ask the
physical host.

Since the virtual machines use virtual network interfaces provided by
the physical host, this physical host can see MAC addresses and IP
addresses.

As a management problem, this can be easily solved by an agent which
runs on the physical hosts therefore I don't think the IETF needs to do
work on this problem. What would be good is for more people to implement
pure IPv6 networks on their virtual machine infrastructure and write
about it.

Since virtualization increases the number of IP addresses consumed per
physical machine, it could lead to IPv4 exhaustion happening sooner
rather than later. By using pure IPv6 on the virtual machines there is
effectively no limit to the number of addresses that can be used, and if
someone wants to implement some kind of structured numbering system in
their /64 subnet, the bits are freely available to do this.

This USENIX paper:
http://www.usenix.org/events/usenix06/tech/menon/menon_html/index.html
Optimizing Network Virtualization in Xen
provides some information on how one of the more popular virtualization
environments handles networking.

--Michael Dillon

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