Do you anticipate your instance eventually growing to the point where you would have to outsource your hosting and start taking donations to cover the cost?

I currently dont have open registration without me confirming every entry application so uncontrolled growth isn't really possible. Ill probably close registration as soon as there are too many people for me to host the instance in my basement. I would probably set up a donation page if I paid more than like 30 bucks a month for hosting.

And do you believe donations would be enough to pay off the costs, given the voluntary and variable nature of donations?

Donations seem to work fine on big instances like lemmy.world . Not sure about smaller ones tho

What is your opinion of using ads to cover the cost of hosting?

I hate ads and everything that tries to shove them down my throat. Most people on lemmy are somewhat tech savy and are probably already using an adblock. So ill make the experience a lot worse for a small amount of people without adblock and wouldnt be getting much money.