[cereal_cable]

Plus layer 2 switches when they don't know the destination port will flood. With so many hosts that would be absolutely horrific.

I've seen computers at moderately sized LAN parties (talking 100 nodes, far from the large or even massive events) that were literally crippled by the broadcast traffic. At some point the flooding and layer 2 discovery (ARP) would do the same as well.

Limiting the broadcast domains with layer 3 really makes the Internet possible. Sure, you can have less overhead and simply do layer 2 only, and really it is completely possible. It's just such a rare use case that it in practice isn't important enough to actually do.