Issue with Domain even though correctly pointed during local quickstart

I am getting the following error:
challenge failed for domain

Though the domain is pointed to the correct IP address.

You seem to be using RoundRobin in your DNS. If those IPs are not for the same server then when letsencrypt’s certbot runs the challenges only one of your servers is capable of answering.

If you need that DNS schema then you should use a different method to generate/distribute your certs.