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Can I use iCloud drive for desktop, documents, and downloads folder and then use dropbox in its own folder? Their files won't intersect but wondering if this is a bad idea.

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This is perfectly fine.

In fact, you can have multiple services all running like iCloud, OneDrive, DropBox, etc. Each will have their own folders. Documents, Downloads, and Desktop by default sync to iCloud. The other services do not re-map those folders to their services.

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