CoreOS on DigitalOcean (using "Debian 7 x64" as a base)

cloud-config.yml

#cloud-config

hostname: <<your chosen hostname>>

users:
  - name: <<your chosen user name>>
    groups:
      - sudo
      - docker
    ssh-authorized-keys:
      - <<your ssh key (should start with "ssh-rsa ...")>>

coreos:
  units:
    - name: static.network
      content: |
        [Match]
        Name=ens3

        [Network]
        Address=<<your host's static IP, assigned by DO>>/24
        Gateway=<<your host's gateway's static IP>>
        DNS=8.8.8.8
        DNS=8.8.4.4

    - name: media-doroot.mount
      command: start
      content: |
        [Mount]
        What=/dev/vda
        Where=/media/doroot
        Type=ext4
    - name: format-docker-store.service
      command: start
      content: |
        [Unit]
        Requires=media-doroot.mount
        [Service]
        Type=oneshot
        RemainAfterExit=yes
        ExecStart=/media/doroot/usr/sbin/create-coreos-docker-store
    - name: var-lib-docker.mount
      command: start
      content: |
        [Unit]
        Requires=format-docker-store.service
        Before=docker.service
        [Mount]
        What=/dev/disk/by-label/docker
        Where=/var/lib/docker
        Type=btrfs

create-docker-store.sh

#!/bin/sh
mkdir -p /media/doroot/var/lib/coreos

if [ ! -f "/media/doroot/var/lib/coreos/docker.img" ]; then
  DOFORMAT=1
fi

truncate -s 10G /media/doroot/var/lib/coreos/docker.img
LODEV=`losetup -f --show /media/doroot/var/lib/coreos/docker.img`

if [ -n "$DOFORMAT" ]; then
  mkfs.btrfs -L docker "$LODEV"
fi

HOWTO-CoreOS-on-DO.md

1. run sudo apt-get install squashfs-tools kexec-tools
2. copy "update.sh" to /usr/sbin/update-coreos, and make it executable
3. copy "create-docker-store.sh" to /usr/sbin/create-coreos-docker-store, and make it executable
4. copy "cloud-config.yml" to /etc/default/coreos, modifying it to suit your preferences
5. run sudo update-coreos -d
6. reboot

update.sh

#!/bin/bash

set -e

BASE_URL="http://storage.core-os.net/coreos/amd64-usr/alpha"

KERNEL="/boot/coreos/vmlinuz"
INITRD_IMAGE="/boot/coreos/initrd.cpio.gz"
INITRD_TEMPLATE="/boot/coreos/initrd.template"
CONFIG="/etc/default/coreos"
CONFIG_LINK_DIR="/boot/coreos/initrd.template/usr/share/oem"

if [ ! -f "$CONFIG" ]; then
  echo "cannot proceed without a valid cloud-config in $CONFIG; aborting"
  exit 1
fi


mkdir -p "$CONFIG_LINK_DIR"

if [ "$1" = "-d" -o "$1" = "--download" ]; then
  shift
  REDOWNLOAD_KERNEL=1
  REDOWNLOAD_INITRD=1
fi

if [ ! -f "$CONFIG_LINK_DIR/cloud-config.yml" ]; then
  ln -s "$CONFIG" "$CONFIG_LINK_DIR/cloud-config.yml"
fi

if [ ! -f "$KERNEL" ]; then
  REDOWNLOAD_KERNEL=1
fi

if [ "$(find "$INITRD_TEMPLATE" -name "*.squashfs" -type f | wc -l)" -eq 0 ]; then
  REDOWNLOAD_INITRD=1
fi


if [ -n "$REDOWNLOAD_KERNEL" ]; then
  curl "$BASE_URL/coreos_production_pxe.vmlinuz" > "$KERNEL"
fi

if [ -n "$REDOWNLOAD_INITRD" ]; then
  find "$INITRD_TEMPLATE" -name "*.squashfs" -type f -delete

  TMP=`mktemp -d`
  pushd "$TMP" >/dev/null
    curl "$BASE_URL/coreos_production_pxe_image.cpio.gz" | zcat | cpio -id
    find "$TMP" -name "*.squashfs" -type f -exec 'mv' '{}' "${INITRD_TEMPLATE}/" ';'
  popd >/dev/null
  rm -rf "$TMP"
fi


rm -f "$INITRD_IMAGE"

pushd "$INITRD_TEMPLATE" >/dev/null
  rm -f ./manifest
  find . -name "*.squashfs" >> ./manifest
  find ./usr >> ./manifest
  cat ./manifest | cpio -o -H newc -L | gzip -nc - > "$INITRD_IMAGE"
popd >/dev/null

I extended your code and integrated it into the Deis bootstrapping: deis/deis#1159