Can I set my database hostname as 'localhost'?

The answer to this question depends on the platform type that you are using at 20i!

20iCloud, AWS and GCP Cloud Servers: 

Yes, 'localhost' can be used as the database hostname on all Cloud Servers. Unlike our shared hosting platform types, a Cloud Server runs all services on the same single server, including MySQL - this means that localhost can be used as the database hostname.

Linux, WordPress, Windows and Managed VPS Platforms:

No, you would need to set the database hostname as the server that it's on at 20i.

You can find this by going to the MySQL Databases icon within a package. The hostname you’ll need to use will be something similiar to ‘shareddb1b.hosting.stackcp.net’ although it's likely the database name on your package will be different.

'localhost' generally means the MySQL databases are hosted on the same server as the websites, which is quite common in the web hosting industry with hosts that have a 'single-server' approach where all services run from the same machine.

It's different with 20i shared hosting and Managed VPS as we split all services and have a strict 'one server, one rule' policy. 

At the 20i data centres, web traffic, MySQL traffic and storage are all physically different machines, so 'localhost' doesn't work.