How to use Spotify as primary iPhone app for playing local files - without overloading my phone

[cybrntktgr]

Hi there, 

Since Apple has replaced iTunes with the awful Music app, I want to see if I can use Spotify as a complete replacement for playing local files.  I presently have something over 40 GB of music on my phone (5S, 64 GB), and I want to make sure I understand how this works, so I know best how to proceed.

With regards to using Spotify as a player for your already owned (local) music, I see references (exclusively) to "playlists" and "available offline."  That is, rather than, "download song X onto your phone."  But this is what it means, right?  When you sync your local files from your computer to Spotify, you aren't playing the songs already on your phone's harddrive; you are downloading Spotify's (encrypted ogg) version of your song onto your phone?  The reason I ask is that it seems like if I am going to use Spotify as THE music player on my iphone, and make thousands of the songs I own available to me through the app, then I have to delete all of the music that's currently occupying space on my iPhone.  Is that correct?

Thank you.