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I am looking to host 100s or maybe 1000s of isolated wordpress webistes (for development purpose) on a single VPS so what do you think will be the best approach to achieve this.

It will all be done using a single click button (Script) which will create a unique subdomain and install wordpress by copy-pasting the files and database. All of these sites will not have any traffic.

Now I am confused between using docker or v-hosts with apache or nginx. What do you think will use less resources and is best for the same purpose.

NOTE: The sites will not have any traffic, so there is no concern about load balancing, uptime requirements, visitors, spikes and similar stuff. It will all be used for development purpose and sites will be deleted from time to time or maybe automatically after some time.

You can take a look at poopy.life (discontinued) and wpsandbox.org, the usecase will be similar to these but for my own customized usage.

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Docker containers and vHosts aren't the same thing.

You'll use Docker to store WordPress app in a container, this container sharing the system's kernel. You can even store a database in the same container.

You'll use vHosts in Apache/nginx to make your domain pointing to a specific container by passing the entering request on the Web server in the container.

You can have a look in DockerHub about the WordPress image and in the millions of tutorials talking about setting up a reverse proxy with Apache or nginx (I'll prefer nginx since it's faster and lighter than Apache).

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