I want to set up virtual machine with encrypted root disk (yes, it requires entering decryption password on the boot; VNC console should do that).
Yes, I know there is multiple ways to circumvent the encryption: someone from Digital Ocean could easily eavesdrop the password or dump memory contents and obtain the password from there.
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One option on Ubuntu is to set up an encrypted home directory for your user. This can be done easily, even after the fact: