When using virtualhosts for each domain, do I need to create a DNS record for each site?

The DNS for my domain names are handled through my registrar, and when I make a new site, I point the @ A record and www CNAME to my droplet’s IP address and then create a virtualhost for that domain on my droplet.

Do I even need to do anything with DNS on my droplet when doing sites this way?

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You just need to add the DNS records for @ and the subdomains you’re going to use (usually “www”). You don’t need to install a DNS server on your droplet if that’s what you’re asking.