Note- In dynamically negotiated protocol VTP domain name should match both end else it will not form ether-channel.
Most probably, this is not true. The VTP domain name is certainly not a part of LACP negotiation and I am also not aware that it would form a part of the PAgP negotiation. Perhaps you are confusing this with Dynamic Trunking Protocol, DTP?
Let me also stress that the on mode should not be used until absolutely necessary. Using the on mode unjudiciously may under certain conditions lead to creation of switching loops that will not be mitigated even by STP. LACP/PAgP will allow the EtherChannel to come up only if both ends agree on aggregating the ports, avoiding the unpleasant problems caused by a misconfigured EtherChannel.
I would stay away from ON mode in chanenling, alot of the time it leads to switching loop.
on the other hand, PAGP/LACP allows dynamically negotionation of etherchannel one being propietary and the other open standard. Even LACP allows active/standby by bundling multiple links and using some of them but the others are in standby mode incase any member channel fails.
From Wikipedia (yeah yeah I know) "EtherChannel supports both LACP and Cisco's PAgP, whereas 802.3ad uses LACP.".
This is, I believe, just playing with words. EtherChannel is the original name for the then-proprietary Cisco technology that eventually got standardized by IEEE as 802.3ad. When EtherChannel first came to market, PAgP was the signalling protocol in use. After IEEE standardized the EtherChannel, it brought its own LACP as the signalling protocol. Therefore, with 802.3ad, you will never see PAgP because 802.3ad standard recognizes only LACP. However, there is no difference between EtherChannel with LACP and 802.3ad with LACP: the EtherChannel with LACP is 802.3ad.
So... If you set it to channel mode "on" does it use EtherChannel or 802.3ad?
Channel mode "on" means neither LACP nor PAgP; rather, it means simply "EtherChannel" or "Link aggregation". No dynamic signalling is present but still it is the mechanism of bundling several links together.
what is the protocol that the channel uses?
With mode on, there is no protocol involved. Please note that both EtherChannel and 802.3ad primarily describe an algorithm of using parallel links between devices, i.e. not a protocol in terms of encapsulation or specific messages, but rather a procedure of utilizing several links at once. The LACP and PAgP are additional protocols that may or may not be used.
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