Michael Kaplan explains one of the major dangers of internatinalized domain names (IDNs): phishing. One of the tactics that phishers use to con people is to create URLs that look like reputable URLs (citibank.com; ebay.com) yet really aren’t. They do this by either slightly altering the URLs or using characters that appear similar to one another (o vs. 0). The more characters you allow within the domain name system, which is what IDNs are all about, the greater the odds for phishing to be successful.
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