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We offer both options to our affiliates. One free hosted gallery site that is listing our galleries had to use the unencoded link code because of the way their software handled presenting the urls to participating webmasters.
And I think Chop at hfslinks.com is using our undencoded links to the hosted free sites.
I think some affiliates are more comfortable with the unencoded because it shows the user name they specified when they set up their account. I have done a lot of testing to make sure that those dificult to understand encoded ones work properly and they are all recording accurately.
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