I am a beginner in networking. What I do not quite understand about establishing site to site VPN connections is - what happens when you connect 2 networks and 2 servers have identical private IP addresses?

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You end up having to do something called double NAT. You NAT each side to a different network, tricking the two endpoints to pass traffic.

It's a bit complicated and not very elegant, but the only way to make it work.

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