How do I update the OS on my device?
Is it possible to upgrade unlocked Motorola Droid to any Android OS version. Can this be done through wifi or does it has to be pushed through Verizon?
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If you unlock (or root) your Droid and upgrade it using the official OTA (Over The Air) update. Your phone will sure be unrooted again. But for Droid, it is pretty easy to root it even with the latest Verizon OTA update.
Go to droid-life.com and click root in the menu bar. You will find many easy-to-follow instruction. Just one advice, please you start rooting your phone, read the comments to see if there are any major issues.
Once your Droid is rooted, install ROM Manager. It will let you back up your existing ROM and install many different ones, including the latest Android version, on one click.
well yes and no.
Yes: Your unlocked phone will continue to receive updates from Verizon (though those updates may re-lock your phone depending on how you unlocked it, requiring you to unlock it again).
No: You can't just upgrade to any android OS version. The stock android open source project wouldn't have the drivers your phone needs.
Kind of: You can find a community rom for your phone that is based on the android open source project or customized versions of the motorolla rom. For the moto droid I believe that the "Bugless Beast" rom is the most popular. Another popular rom is CyanogenMod