Starting in version 7.0 Update 2, encrypted virtual machines and virtual TPMs can continue to function even when the key server is temporarily offline or unavailable. The ESXi hosts can persist the encryption keys to continue encryption and vTPM operations.
Before vSphere 7.0 Update 2, encrypted virtual machines and vTPMs require that the key server always is available to function. In vSphere 7.0 Update 2 and later, encrypted devices can function even when access to a key server is disrupted.
Key Persistence on the ESXi Host
When using a standard key provider, the ESXi host relies on vCenter Server to manage the encryption keys. When using a trusted key provider, the ESXi host relies directly on the Trust Authority Hosts for keys, and vCenter Server is not involved.
Regardless of the type of key provider, the ESXi host obtains the keys initially and retains them in its key cache. If the ESXi host reboots, it loses its key cache. The ESXi host then requests the keys again, either from the key server (standard key provider), or the Trust Authority Hosts (trusted key provider). When the ESXi host tries to obtain keys and the key server is offline or unreachable, vTPMs and workload encryption cannot function. For edge-style deployments, in which a key server is typically not deployed on site, a loss of connectivity to a key server can cause unnecessary downtime for encrypted workloads.
Starting in vSphere 7.0 Update 2, encrypted workloads can continue to function even when the key server is offline or unreachable. If the ESXi host has a TPM, the encryption keys are persisted in the TPM across reboots. So, even if an ESXi host reboots, the host does not need to request encryption keys. Also, encryption and decryption operations can continue when the key server is unavailable, because the keys have persisted in the TPM. In essence, when either the key server or Trust Authority Hosts are unavailable, you can keep running encrypted workloads "key server free." Also, vTPMs can likewise continue to function even when the key server is unreachable.
Starting in vSphere 7.0 Update 2, vSphere Native Key Provider supports key persistence. When using a vSphere Native Key Provider, the vCenter Server generates the keys and no key server is required. The ESXi hosts get a Key Derivation Key (KDK) from vCenter Server, which is used to derive other keys. After receiving the KDK and generating other keys, the ESXi hosts do not need access to vCenter Server to do encryption operations. In essence, a Native Key Provider always runs "key server free."
To enable or disable key persistence, see Enable and Disable Key Persistence on an ESXi Host.