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If I upgrade to a plan with smartsync will I be able to run iphoto and itunes without using the space on my hard drive?
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No.
Any process that tries to access a file that is marked as Online-only will cause Dropbox to download the file back to your computer so it can be accessed. The same happens when you open an Online-only file; Dropbox will download it back to your computer and mark it as Local.
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And, to be clear, we are talking about smartsync, not selective sync? I was hoping to upload itunes and all of the music files to the cloud and run it from there.
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Correct, we're talking about Smart Sync. It does not work the way you think it does. Any files that are marked as Online-only will be downloaded back to your computer and marked as Local when you (or any other process) accesses them.
I know of no cloud storage service that works the way you want it to, and even if there is one, it would be so slow to run programs from it that it wouldn't be worth it. That is not what cloud storage is meant for.
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