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what is the difference between a dedicated server and a hosted server


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Well, it does depend a little on your setup. Generally yes, you can get better performance, if your System has 4 or more cores and enough RAM, because a dedicated server is, as the name suggests a dedicated service, running independantly of your local game.

So instead of both Server and Client running in the same thread, they are 2 (or 3, if you also have a caves shard) seperate, asynchronous threads, which can be distributed over multiple CPU cores. (Client, Overworld and Caves) Just think of handing two seperate work tasks to your coworkers, so you can focus on your own. :D

If you have only 2 cores, and/or very little RAM, running seperate threads can actually be detrimental to performance, as you need a little more resources in total.

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