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I understand it in the case of a son being named after his father, and then giving him a nickname to avoid confusion. This was why my father Joseph was called Bud.

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My SO goes by a completely unrelated nickname. In his culture, this is extremely common. When I questioned someone more knowledgeable than I about why that is, I was told that it's because to have a street name is protection against the police. Sounds reasonable. But in my SO's case, he was called by his nickname from very early childhood. His nickname is that of a great-uncle. I'm not sure why it's not on his birth certificate. I mean, I think his nickname is ridiculous, but his mother thought it was good enough to call him by, so I don't know why she didn't think it was good enough to put on his birth certificate.