Hello ElimGarak, I hope you are doing well. Your server must send mail using GoDaddy relay servers. This prevents abuse of our network and helps ensure our customers don't get blacklisted for using the same network as a spammer.
With cPanel's hosting relays, you are literally connecting to a mail service on the same machine your website is hosted on. That connection isn't going over a network, so saying it can be intercepted by anybody is an overstatement.
I think it depends on your hosting type. Your first configuration is fine with any hosting type other than cPanel. With cPanel the server should be localhost, but everything else the same, no SSL or login. Please also check your email configuration again.