Question

Should /etc/hosts have the IP and domain name I want to use with the vps?

Should /etc/hosts have the IP and domain name I want to use with the vps? Running Debian 8.4.

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If your intention is to be able to resolve your IP address from anywhere on the web, then the procedure is usually to create DNS entries using the DO control panel, and then configuring with your domain registrar to point to the DO DNS servers. For the first part try this basic DO DNS tutorial. For the second part, there is an older tutorial on setting up with external registrars that may still apply.