Hi @TeenZ
Thanks for reaching out to Microsoft Q&A.
It's ok to build a sync lab without having to purchase and verify a domain. However, you won't be able to use the same UPN from your onpremises environment (contoso.com) on Entra ID, so after the sync, your users will be created as user1@contosoxyz.microsoft.com on Entra ID, which doesn't prevent you from running any tests related to a hybrid environment.
To sync your onprem users to Entra, you have 2 options:
1 - Entra Connect Sync: When using this option, all the logic and processing of the sync engine happens locally on the server you install the agent. It brings you more customizable options and less limitations, but demands more administrative efforts to manage it
https://learn.microsoft.com/en-us/entra/identity/hybrid/connect/whatis-azure-ad-connect-v2
2 - Entra Cloud Sync: This is a lightweight client that you install on the server, but as opposed to the latter option, everything runs on the cloud requiring minimal resources from the server. Cloud sync has some limitations as described on the comparison link below, but that's the best option for the majority of use cases.
https://learn.microsoft.com/en-us/entra/identity/hybrid/cloud-sync/what-is-cloud-sync
Thanks,
Fabio