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I thought I'd be able to open my Friendica server to friends as soon as my reverse proxy was set up, but it turns out I still need to figure out how to set up an email server on a VPS and use it for system emails so that Friendica password notifications, etc. actually get delivered.

This project is neverending! And I feel like I'm missing crucial information for setting up a mail server.
I strongly discourage you from setting up a full-fledged mail server. It isn't required to be able to send emails and it is a digital paperwork nightmare to ensure your emails aren't simply rejected by the major email providers (Google, Microsoft and Apple, what do you know). I didn't have to do that, but in my case I've associated my top-level domain with a personal Fastmail subscription, so it can be probed as an actual mail server.

But you can use the SendGrid free plan to send up to 100 emails a day for example: You'll have to configure your Friendica node to use their SMTP server with the PHP Mailer addon, but otherwise you won't have to go through the painstaking process of setting up your own email server.
Hey @Hypolite Petovan, I'm back at this.

The admin page for PHP Mailer reads:

You can override the default value of the following config keys in your base Friendica install config/addon.config.php file:

When I edit config/addon.config.php, the first line reads:

// Copy this configuration file to addon.config.php and edit it if you want to configure addons, see below example for the twitter addon

I'm getting slightly different instructions, so I wanted to check: should I copy addon.config.php to phpmailer.config.php and then edit the configuration options there? Or should I do it directly in addon.config.php?
You should edit addon.config.php, thanks for pointing out the confusing wording. I've had to assists someone else who didn't understand the structure of PHP arrays in the context of configuration files.
Got it, thank you.

One more question regarding setup: the sample config for PHP Mailer includes this:

    // smtp (Boolean)
    // Enables SMTP relaying for outbound emails
    'smtp' => false,

Should I change this to true if I'm using a SendGrid relay? Common sense tells me yes, but I just want to double-check.
Yes, otherwise your Friendica node will try to use the built-in mail() command, which relies on whatever MTA is installed on your server.
Roger that. Thanks, Hypolite.