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I was under the impression that washing potatoes is very bad because they soak up the water and that is bad for some reason (same tendency which makes them soak up oil, which is good for some reason) and you should just clean with a dry paper towel. Can anyone confirm?

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Incorrect. Scrub that potato for all it's worth. I even use a scouring pad to remove all the dirt. Makes for a crisper skin when rubbed with butter.