At that time maximum organizations were USA based and they bought Class A and Class B addresses even if their hosts requirement was small. So most of the address space was utilized in 5 years. To solve this problem, NAT (Network Address Translation) arrived. That solved the problem to some extent but still there was huge wastage of addresses.
A question arises that are there only 3 kinds of networks? Is the requirement of hosts in every network is same as specified in the Classes? No. Say you own a small company in which there is requirement of only 10 hosts and it is just enough for your company. And for that if u acquire a Class C address of 256 hosts, it will be a huge wastage.
Here Subnetting plays its role. It breaks one network into many smaller networks according to your requirement.
In the case of 10 hosts, you acquire a network address of /28 form your service provider. You can have 16 sub networks with 14 hosts each. So this way you are not exhausting your IP address space and also there is a possibilty to grow you network in future.
Another advantage is that it keeps the size of routing tables small through Summarization.
You purchase an address from you service provider and can break that into as many networks as per your requirement but always send the traffic back to your provider through the summarized network (i.e the one you have purchased). There is no need to send all the subnetted addresses since router just looks at the network number to route traffic. The route from the Internet to any subnet of a network is the same, no matter which subnet the destination host is on.
So better traffic ontrol.
Now, difference between DNS and DHCP?
DNS is an application that translates Fully qualified Domain Name(FQDN) say www.yahoo.com to IP address. Its an internet directory database. Their a large number of DNS servers arranged in an hierarchical fashion and distributed around the world
While DHCP dynamically assigns Ip address to the hosts on the LAN. When a user in a LAN is up, it sends a broadcast to know its IP address.The DHCP server responds the client with the ip address. It also creates a MAC table to avoid IP address conflict.
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