SOCKS proxies can be created without any special SOCKS proxy software if you have OpenSSH installed on your server and a SSH client with dynamic tunnelling support installed on your client computer.
Since you're talking about LimeChat, I'm assuming you're running Mac OS. To create a SOCKS proxy or dynamic SSH tunnel in Mac OS you'll need to open up the Terminal (Applications >> Utilities >> Terminal)
Once there type and press enter:
ssh -D 10000 user@<IP Address or Domain of your DigitalOcean VPS>
Now, enter your password and make sure to leave the Terminal window open. You have now created a SOCKS proxy at localhost:10000. Only close this window if you wish to disable your local SOCKS proxy.
Now, you can now configure any software to proxy through your DigitalOcean VPS by telling it to use localhost:10000. Optionally, you can configure your system to use this SOCKS proxy for all outgoing connections.
To forward your IRC connections in LimeChat through your DigitalOcean VPS (warning you might get DDoS'd) edit Server Properties > Details (see LimeChat Proxy Preferences) Enter localhost for the SOCKS server and 10000 for the port.
To forward all connections in Mac OS X through your DigitalOcean VPS Go to 'Preferences' >> 'Advanced' >> 'Settings…' >> 'Manual proxy configuration'. Enter localhost for the SOCKS server and 10000 for the port. (see Setting up a SOCKS proxy in Mac OS X
One caveat is that some applications cannot correctly forward DNS requests through this local SOCKS proxy (i.e. they cannot talk the SOCKS v4a or SOCKS v5 protocol.) If that's the case you'll can either email the upstream developer and ask for a bugfix/ SOCKS5 support, switch applications, or use an intermediate proxy client that is able to speak SOCKS 5 such as Polipo or Privoxy.
We just published an article on setting up your own SOCKS proxy! https://www.digitalocean.com/community/tutorials/how-to-route-web-traffic-securely-without-a-vpn-using-a-socks-tunnel