Do I need a domain name (FQDN) for the hostname?

No - the hostname is an arbitrary identifier for your VPS. It can be either a Fully Qualified Domain Name (FQDN) or a single word. It must be at least 4 characters. It may not contain any underscores.

Please note that RamNode is NOT a domain registrar. If you want to buy a domain name to use here, you will need to do so at a registrar.
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