Why does creating a broadcast storm by directly connecting two ports on a switch cause the bandwidth to all the other ports to cease?
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Because broadcasts are broadcast to all switch ports.
This means if there is a broadcast packet arriving at one switch port, it will be broadcast to all switchports. Due to the loop, it arrives again on the switch, and thus will be broadcast again to ALL switchports. (and thus it gets "duplicated", because the original packet is still getting transported, so now you have 2 broadcasts going on... and so on)
Broadcast traffic does not have any TTL, so it will be going on forever until the loop gets broken again

MichelZ
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A layer 2 broadcast does not have a TTL. A layer 3 broadcast does have a TTL. – joeqwerty May 02 '14 at 06:12
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Can this be alleviated by QoS? – user218352 May 02 '14 at 06:16
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Yes, but as we talk about a switch loop, we're talking layer 2. – MichelZ May 02 '14 at 06:16
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@user218352 No. The proper tool to use is STP (Spanning Tree Protocol) – MichelZ May 02 '14 at 06:16
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Layer 2 doesn't have QoS? – user218352 May 02 '14 at 06:17
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@MichelZ Oh, I do see how STP would be THE solution for a problem like that. – user218352 May 02 '14 at 06:18
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There are multiple ways to deal with broadcast storms depending on the switch you use. You did not ask that however. If you want to know if you can use QoS to prevent a Broadcast storm, then create a new question for it. – MichelZ May 02 '14 at 06:20