Wouldn't it seem i only block certain people that way?
As per the description, if you add "*" it will ignore "all" the messages (incoming messages probably).
If you put a username, then that specific user only will be ignored.
is there limit of chracters for that field?
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There's no note related to it, so i guess there's character limit to it as long, it's an existing username.
User
* can't be ignored on his own

But that would be the most ignored user in this forum if everyone follows same settings.
