Explanation
IPv6 link-local addresses are designed to be used in three situations: for neighbor discovery, for local IP communication on the IPv6 capable routers, and for addressing on a single link for purposes such as auto-address configuration. Neighbor discovery is a protocol that allows IPv6 nodes to discover each other and learn their link-layer addresses on a local network. Neighbor discovery uses link-local addresses to send and receive messages such as router advertisements, router solicitations, neighbor advertisements, and neighbor solicitations34. Local IP communication on the IPv6 capable routers refers to the ability of routers to exchange routing information or management traffic using their link-local addresses as source and destination addresses. This reduces the need for global unicast addresses on router interfaces that are not reachable from outside the local network35. Addressing on a single link for purposes such as auto-address configuration refers to the use of link-local addresses to enable IPv6 nodes to obtain an address without manual configuration or a DHCP server. Link-local addresses can be automatically derived from the interface identifier in the modified EUI-64 format or randomly generated. Link-local addresses can also be used to test the connectivity of a link before obtaining a global unicast address36.
References: Understand the IPv6 Link-Local Address - Cisco, Link Local Address - GeeksforGeeks, IPv6 Address Types | Link-Local, Global Unicast, etc. IPCisco, MPLS Label Distribution Protocol Commands - Cisco