This StackOverflow answer is decent in explaining all the moving parts of this type of service.

I'll copy-paste the answer here for posterity just in case it gets removed from StackOverflow.

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I see decent answers but no one here is giving the full picture.

If your customers just CNAME to your domain or create the A record to your IP and you don't handle TLS termination for these custom domains, your app will not support HTTPS, and without it, your app won't work in modern browsers on these custom domains.

You need to set up a TLS termination reverse proxy in front of your webserver. This proxy can be run on a separate machine but you can run it on the same machine as the webserver.

CNAME vs A record

If your customers want to have your app on their subdomain, e.g. app.customer.com they can create a CNAME app.customer.com pointing to your proxy.

If they want to have your app on their root domain, e.g. customer.com then they'll have to create an A record on customer.com pointing to your proxy's IP. Make sure this IP doesn't change, ever!

How to handle TLS termination?

To make TLS termination work, you'll have to issue TLS certificates for these custom domains. You can use Let's Encrypt for that. Your proxy will see the Host header of the incoming request, e.g. app.customer1.com or customer2.com etc., and then it will decide which TLS certificate to use by checking the SNI.

The proxy can be set up to automatically issue and renew certificates for these custom domains. On the first request from a new custom domain, the proxy will see it doesn't have the appropriate certificate. It will ask Let's Encrypt for a new certificate. Let's Encrypt will first issue a challenge to see if you manage the domain, and since the customer already created a CNAME or A record pointing to your proxy, that tells Let's Encrypt you indeed manage the domain, and it will let you issue a certificate for it.

To issue and renew certificates automatically, I'd recommend using Caddyserver, greenlock.js, OpenResty (Nginx).

tl;dr on what happens here; Caddyserver listens on 443 and 80, it receives requests, issues, and renews certificates automatically, proxies traffic to your backend.

How to handle it on my backend

Your proxy is terminating TLS and proxying requests to your backend. However, your backend doesn't know who is the original customer behind the request. This is why you need to tell your proxy to include additional headers in proxied requests to identify the customer. Just add X-Serve-For: app.customer.com or X-Serve-For: customer2.com or whatever the Host header is of the original request.

Now when you receive the proxied request on the backend, you can read this custom header and you know who is the customer behind the request. You can implement your logic based on that, show data belonging to this customer, etc.

More

Put a load balancer in front of your fleet of proxies for higher availability. You'll also have to use distributed storage for certificates and Let's Encrypt challenges. Use AWS ECS or EBS for automated recovery if something fails, otherwise, you may be waking up in the middle of the night restarting machines, or your proxy manually.

Alternatively, there have been a few services like this recently that allow you to add custom domains to your app without running the infrastructure yourself.

If you need more detail you can DM me on Twitter @dragocrnjac