Downgrading instance
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I want to test how my instance performs with smaller RAM/processor (on DigitalOcean). I think on DO this means I have to destroy it and created a new one.
Just make sure my Cloudron backups are not on the same disk, install new instance and follow app restore procedure, right?
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Yes that is correct, follow the instructions at https://cloudron.io/documentation/backups/#move-cloudron-to-another-server
Please not to not destroy the old server until the new works, you can just shut it down temporarily as mentioned in the docs.