I would argue a VPS is less secure than a trusted provider. Of course, the definition of what’s trustworthy is up to each person. The reason I say it’s less secure is for 2 reasons:

1. As you stated, the VPS provider sees everything. They also have direct access to the box themselves. Trusting them is just the same as asking to trust a VPN provider, the only difference being that a VPS provider will ask for personal information where a good VPN provider won’t (i.e. Mullvad)
2. You’re a part of the security of the device. If you’re not 100% familiar with exactly what you’re doing to secure the VPS, you’re likely exposing yourself in some way to bad actors. I also say you’re “part” of it because you also have the dependency of the VPS provider being secure so someone can’t compromise your machine.

The belief that a VPN provider doesn’t help privacy is a myth. But it’s true that you can’t depend on the VPN being your only solution to privacy. There are more steps you must take beyond just a VPN, but it’s definitely a required step if you want to be truly private. As an analogy: if people said “drinking water won’t make you healthy” that’s not true… But it’s also only a part of what you need to be healthy and the statement’s only true if you ignore the other things you need.

Further on the privacy front for my personal opinion: I don’t think there’s a such thing as a trustworthy ISP with personal data since they definitely track everything you access and probably sell that data, but there are a few trustworthy VPNs who likely don’t do this. I’d rather take the risk in a VPN provider that is probably not doing what ISPs do, also allowing me to further enhance my anonymity online.

For me, I’ve been using Mullvad for about maybe 5 years now, along with a ton of other things I’ve setup for privacy. Haven’t seen a targeted ad in nearly that amount of time, websites always think I’m located somewhere else, and any data breaches I’ve been a part of where IP addresses are in the data are of no concern to me.

Be sure to also look into geo tracking. If the device you’re using is wireless, chances are Google and such can get your exact location if you’re exposing your browser or software to geo tracking on the web, or if you don’t spoof your Mac addresses. How they do this: the Google maps vehicle that drives around collects the locations of wireless devices and their Mac addresses, so that when you have geo enabled, they can pinpoint you down to a very close lat/long coordinate.

I think both protect from different threat vectors.

A VPN provider can anonymize you but you have to trust them to not use the backchannel in any way (and of course to not actually log everything you do).

Hosting your own VPN isn’t anonymous anymore, since the final connection still leads back to you. But it can properly shield you from untrusted public networks and you can be sure, that you are private, since you are in your own network then.

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