Methods, apparatus and systems, including computer program products, implementing and using techniques for providing a scalable and elastic two-level overlay computer network. A host network is provided. The host network includes a system of interconnected computers and can to support one or more transport layer protocols. A first overlay network is generated on top of the host network. The first overlay network includes one or more first-level nodal entities. At least some of the first-level nodal entities operate as factories for generating second-level nodal entities in a second overlay network. In response to receiving an instruction, one or more factories dynamically generate the second overlay network. The second overlay network includes several networked second-level nodal entities that can support data processing and data communication between the second-level nodal entities.