1. A network node comprising: a processor configured to: maintain a plurality of mapping entries for one or more virtual network instances when a number of end nodes in the virtual network instance that are directly connected to the network node exceeds a threshold value; receive a data packet destined towards a node within a first virtual network instance, wherein the data packet comprises an inner destination address; match the inner destination address with one of the mapping entries to create a matched mapping entry; obtain an outer destination address that corresponds to the matched mapping entry; encapsulate the data packet with the outer destination address; and forward the encapsulated data packet based on the outer destination address, wherein the plurality of mapping entries map out all of the addresses for a plurality of end nodes that participate in the first virtual network instance.