Table of contents
What is an overlay VPS?What is an overlay network?What is a VPS?How an overlay VPS worksBenefits of using a VPS for an overlay networkCommon overlay VPS use casesPopular tools for building an overlay VPSChoosing a VPS for overlay networkingSecurity best practices for overlay VPS setupsGetting startedAdditional resources
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VPS → Overlay

What is an Overlay VPS?


Want a way to securely connect multiple networks, share services remotely, or tap into your home setup while you’re away? An overlay VPS setup makes that possible—with more control, better security, and zero reliance on pricey hardware.

Let’s walk through how overlay VPS networks work, what they’re used for, and how to build one yourself.

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What is an overlay VPS?

An overlay VPS is a virtual private server that acts as a hub for an overlay network—a private virtual network that runs on top of existing internet infrastructure. It’s not a special kind of VPS; it’s how you use a VPS to create and manage your own secure network layer.

Instead of setting up physical VPN appliances or enterprise-grade routers, you run overlay software (like Tailscale, ZeroTier, or WireGuard) on a VPS. That VPS becomes your always-online access point, routing traffic between trusted devices and keeping it isolated from the public internet.

What is an overlay network?

Overlay networks are virtual networks built on top of a physical one. The physical internet handles the actual data transmission, but the overlay defines how data flows between devices securely and logically.

Think of an overlay network like a secret tunnel: even though your data moves across public internet paths, the tunnel defines its own internal rules—like private IP addresses, access controls, and encryption.

Popular overlay technologies include:

  • VPNs: The oldest form of overlays, providing encrypted tunnels between locations.
  • Tailscale or ZeroTier: Newer tools that use peer-to-peer and mesh networking with auto-configuring nodes.
  • WireGuard: A modern VPN protocol that’s fast, lightweight, and perfect for VPS overlays.

What is a VPS?

A virtual private server (VPS) is a slice of a larger physical server that functions like a dedicated machine. You get full root access, isolated resources, and the freedom to run any software you need.

For overlay networks, a VPS works great because:

  • It’s always online, unlike a home PC or router.
  • You can choose a VPS in any geographic region.
  • It’s affordable, scalable, and easy to configure.

How an overlay VPS works

Overlay VPS setups use your VPS as a central node—or sometimes as a mesh participant—for a virtual network connecting multiple devices. You install overlay software on the VPS, authenticate your devices, and let the software handle encrypted communication between all endpoints.

Some setups let the VPS act as a relay, routing all traffic. Others treat it as a “lighthouse” that helps peer-to-peer devices discover each other. Either way, the VPS plays a crucial role in keeping the network accessible, even when devices are behind NAT or firewalls.

Benefits of using a VPS for an overlay network

Using a VPS as your overlay hub gives you control, privacy, and reliability without needing enterprise infrastructure.

  • Flexibility: Connect devices across homes, offices, and even mobile networks—no static IPs required.
  • Security: Overlay tools encrypt traffic and keep internal services hidden from the public internet.
  • Remote access: Reach home devices, file shares, or media servers from anywhere without port forwarding.
  • Centralized management: Configure access rules, monitor traffic, and manage users from one place.
  • Cost-effective: Skip expensive VPN routers and instead use a $5–$15/month VPS with open-source tools.

Common overlay VPS use cases

Overlay networks powered by a VPS are useful for both personal and small business setups. Here are some examples of what you can do.

  • Secure access to your home network: Reach your home NAS, Plex server, or Raspberry Pi without opening ports.
  • Connect multiple offices or households: Share internal tools, printers, or backup systems across distant locations.
  • Self-host apps privately: Run Nextcloud, Jellyfin, or a dev server and access them only through your overlay.
  • Control IoT environments: Isolate your smart home devices and only allow access via encrypted overlay tunnels.
  • Create a small-business VPN: Set up a secure network for remote employees without a full enterprise VPN solution.

Choosing a VPS for overlay networking

Not all VPS plans or providers are equally suited for overlay networking. Since your overlay network relies on the VPS to act as a central node or relay point, the server needs to be reliable, performant, and accessible at all times.

Here’s what to look for and why each factor matters.

  • Linux OS (Ubuntu/Debian preferred): Most overlay tools like Tailscale, WireGuard, and ZeroTier offer the best compatibility and documentation for Linux environments. Ubuntu and Debian are widely supported and make installation straightforward—even for beginners.
  • Root access: You’ll need administrative privileges to install custom software, open ports, adjust routing tables, or configure firewalls. Without root access, your ability to manage the network stack and secure the server is limited.
  • Stable uptime: The VPS is the heartbeat of your overlay network. If it goes offline, remote devices may lose connectivity or become unreachable. Choose a provider known for high uptime guarantees and fast server recovery in case of issues.
  • Scalable resources: If you’re using the VPS solely as a networking node, basic specs may be enough. But if you also host apps or services on it, you’ll want room to grow in RAM, CPU, and storage.

Security best practices for overlay VPS setups

Even though overlay networks encrypt traffic between devices, your VPS is still a public-facing server that needs proper hardening. Following these best practices helps prevent unauthorized access and keeps your overlay stable and secure.

  • Use SSH key authentication instead of passwords: SSH keys are much harder to brute-force than passwords and eliminate many common attacks from bots scanning for open ports.
  • Keep your overlay software and OS updated: Patching vulnerabilities ensures your server isn’t compromised by known exploits, especially in networking libraries and daemons.
  • Block unused ports with UFW or iptables: Firewalls limit exposure by allowing only essential services—like SSH or WireGuard—to accept traffic, reducing the surface area for attacks.
  • Enable 2FA on Tailscale or ZeroTier accounts: If your overlay uses a web dashboard for user/device control, two-factor authentication protects against compromised logins.
  • Monitor logs and alert on login attempts or strange traffic: Keeping an eye on login logs and network activity helps you detect suspicious behavior early and shut down threats before they escalate.

Additional resources

VPS: A beginner’s guide →

A complete beginner’s guide to virtual private servers

Protect your VPS from DDoS attack →

9 steps to harden your virtual server

Expert tips for managing your VPS →

A complete guide to help you run your VPS with confidence