What are the advantages of paying for a VPN service as opposed to hosting your own?
VPNs are designed around the concept of trust between 2 or more parties, and were intended for corporate/enterprise use.
The popularity of offering "Free VPN" or "Hosted VPN" solutions to the consumer market has dramatically increased. A lot of people seem to forget there has to be a "trust" involved. You wouldn't want to have some random person on your home network, so why would you tolerate that on a virtual up scale of that idea?
Hosting your own private VPN solution has a key distinct advantage, you trust yourself. You know how data is handled, you know who can view VPN data as it's relayed, you can ensure it's quality, reliability, and anonymity. Most people will use a VPS (Virtual Private Server) for hosting a VPN.
Using a third-party hosted solution does come at a cost of some trust, corporations are legally bound entities which may be required to hand over subscriber information. Some self-hosted solutions over come this with payments by bitcoins (for the virtual private server or physical hardware). In some countries, a corporation may also be required to log usage by their clients. Beyond this, you will have to address each company's privacy policy and terms of use.
Tor was the answer for the consumer's idea of anonymity on the internet. This again has some issues with trust, mainly that entry/exit nodes have full implicit trust. It is not made apparent if a "rogue" node was to log your connections, or pass your information in the clear.
If you are not overly concerned about "trust", here are some bullet points to think about:
Self-Hosted
- Security and anonymity to your standards
- Can be faster, as you are the only one using the service
- Must keep up to date with patches/security of software
- Your information is known to the hoster, which could be a third-party
- Only your hosting platform is aware of your IP address
Out Sourced Hosting
- Cheaper, and generally more reliable/constant service
- Don't have to worry about patches/security of software
- Simple payment plans, and generally cheaper
- What happens to your data in between is anyone's guess
- Your data/connections might be logged for legal reasons
- Your data might be altered on the fly for advertisement revenues
Tor
- Easy, usable by the general population
- Free, no real costs
- What entry/exit points do with your data, is anyone's guess
- Slow, due to the number of relays, and non-profit architecture
Anonymity
If you use the VPN to hide your activity, this is less than ideal. To use it as a proxy, someone else clearly needs to host the exit point. Using a machine registered to you personally makes attribution much easier, and plausible deniability much harder.
Cost / performance
If the DigitalOcean box is just for the VPN, you will have a lot of idle CPU cycles at a constant maximum cost. Because the VPN provider can use up every cycle and byte, you might get a bulk rate compared to a dedicated box.
Stability / security
Depending on your skill level, you might enable a weak cipher suit, have no redundancy, or install vulnerable services on the machine, allowing it to be compromised. If you pick the right VPN provider, they will have extensive experience with configuring secure tunnels, and have the hardware behind enterprise-grade firewalls and IDSses
Some fantastic answers already but I think one of the key ones missing is where there is a difference in countries or legal jurisdiction.
People who pirate content or are accessing or writing things that in their country are otherwise illegal or subject to intense scrutiny (i.e. speaking out against a dictator) that wish to avoid all that may pick a VPN provider in a different country, ideally where both the content is legal and/or that country has pretty poor relationship with your country's legal system and/or the added complication in the legal process would assist you.
Of course if "your server" is based in one of those countries already then this doesn't matter so much but if your server is in your lab at your home address then this is one of the reasons a lot of people speak of the "privacy" a VPN provides them.