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NVEs are the ingress/egress points that lie on the boundary of virtual and physical networks. Any physical server or network device can be an NVE. A common deployment is for the NVE to be part of a Hypervisor. The primary functions of the NVEs is to do the following:
Encapsulate/decapsulate Ethernet data frames to and from the GRE tunnel, at Sender NVE and Receiver NVE, respectively.
Ensure that Layer-2 semantics are maintained.
Transmit the REDIRECT and UNREACHABLE messages from the Receiver NVE to the Sender NVE when triggered by a VM move event.
Enable the redirection of traffic and the application of isolation policy scoped to a particular virtual subnet via a VSID.