Why do people host Lemmy instances and how do they pay for them?
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Hosting my own instance on my server just because I can. And I have resources.
If your ISP can give you publicly routed IP address - you can host it too, right from your home!
You should use cloudflare tunnel. Helps secure your server and doesn't matter if you don't have a static IP.
I shouldn't, but MAY.
Also I recommend not to use it because relying on fourth party things for accessibility isn't good. Imagine what would happen when cloudflare will "experience technical difficulties" (c)(r)(tm).