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There wouldn't be any point running dnsmasq only for a local machine :)

RE intermixing hosts file: dnsmasq supports reading from additional hosts files other than /etc/hosts (thank to creshal for that suggestion: https://news.ycombinator.com/item?id=10580082)

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I run dnsmasq locally (and silently redirect all traffic from a certain uid with an iptables rule) to do adblocking and ... minimal parental control on my son's laptop. it is pretty great, I don't have to worry about him using the neighbor's wifi to get around my rules. ;)

Another benefit is it caches DNS lookups.

is this on a PC or a router?

On a laptop. Otherwise I wouldn't know the uid. All users (including services) are allowed outgoing port 53/udp, except my son's user.

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