From RFC 2606, and I quote:
There is a need for top level domain (TLD) names that can be used for creating names which, without fear of conflicts with current or future actual TLD names in the global DNS, can be used for private testing of existing DNS related code, examples in documentation, DNS related experimentation, invalid DNS names, or other similar uses.
There are four such domain names set aside that are un-claimable by anyone. One of them is obvious: .test.com [.org, .net, etc]
But there are three more:
.test.example.invalid.localhost
".test" is recommended for use in testing of current or new DNS related code.
".example" is recommended for use in documentation or as examples.
".invalid" is intended for use in online construction of domain names that are sure to be invalid and which it is obvious at a glance are invalid.
The ".localhost" TLD has traditionally been statically defined in host DNS implementations as having an A record pointing to the loop back IP address and is reserved for such use. Any other use would conflict with widely deployed code which assumes this use.
link: http://www.rfc-editor.org/rfc/rfc2606.txt
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