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The compression algorithm used by vSphere Replication to compress data at the source is FastLZ. This algorithm is designed for high performance and low overhead, which is particularly beneficial in the context of data replication. FastLZ operates efficiently, providing fast compression speeds while maintaining a moderate compression ratio. This efficiency is critical during the data replication process, as it minimizes the impact on system resources and allows for quicker data transfer over the network.

FastLZ is specifically chosen for its ability to strike a balance between speed and data size reduction, making it well-suited for scenarios where replication needs to happen in real-time or near-real-time. By compressing data before it is transmitted, vSphere Replication ensures that less bandwidth is used, which can lead to faster replication times and reduced load on both the source and destination environments.

Understanding the role of different compression algorithms helps in assessing the performance trade-offs and selecting the most appropriate solutions for data center virtualization needs.