Understanding the Loopback Interface
The Internet Protocol (IP) specifies a loopback network with the (IPv4) address 127.0.0.0/8. Most IP implementations support a loopback interface (lo0) to represent the loopback facility. Any traffic that a computer program sends on the loopback network is addressed to the same computer. The most commonly used IP address on the loopback network is 127.0.0.1 for IPv4 and ::1 for IPv6. The standard domain name for the address is localhost.
A network device also includes an internal loopback address (lo0.16384). The internal loopback address is a particular instance of the loopback address with the logical unit number 16384.
The loopback interface is used to identify the device. While any interface address can be used to determine if the device is online, the loopback address is the preferred method. Whereas interfaces might be removed or addresses changed based on network topology changes, the loopback address never changes.
When you ping an individual interface address, the results do not always indicate the health of the device. For example, a subnet mismatch in the configuration of two endpoints on a point-to-point link makes the link appear to be inoperable. Pinging the interface to determine whether the device is online provides a misleading result. An interface might be unavailable because of a problem unrelated to the device's configuration or operation. You can use the loopback interface to address these issues.
Benefits of Loopback Interface
As the loopback address never changes, it is the best way to identify a device in the network.
The loopback interface is always up and it is reachable as long as the route to that IP address is available in the IP routing table. Hence you can use the loopback interface for diagnostics and troubleshooting purposes.
Protocols such as OSPF use the loopback address to determine protocol-specific properties for the device or network. Further, some commands such as ping mpls require a loopback address to function correctly.
You can apply stateless firewall filters to the loopback address to filter packets originating from, or destined for, the Routing Engine.
Junos OS creates the loopback interface for the internal routing instance, which prevents any filter on lo0.0 from disrupting internal traffic.