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I'm seeing that providers like digitalocean expand the space in the VM automatically when you reboot and upgrade. Vultr seems to be doing it too.
How do they do it? Can this be done with proxmox and KVM?
There are several tools for this, like virt-resize followed by live resize2fs in the guest, or if you use lvm can just resize the disk and then resize partition/filesystem in the guest (http://www.naturalborncoder.com/virtualization/2014/12/05/increasing-the-size-of-a-qcow2-image-under-kvm/).
For Centos7 example with xfs filesystem..
yum install -y epel-release & yum install -y cloud-utils-growpart
Add to rc.local or some script
growpart /dev/sda 1 & xfs_growfs /dev/sda1
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