Questions ยป What is a centralized application?

What is a centralized application?

A centralized application (or “centralized app” for short) in the context of cryptocurrencies refers to a software application or platform that is controlled and maintained by a central authority or organization. This means that the central authority has the power to control the operations and data within the application, including transactions, user accounts, and other related functions.

In the context of cryptocurrencies, centralized applications are often contrasted with decentralized applications (or “decentralized apps” or “dApps”), which are built on blockchain technology and operate in a peer-to-peer (P2P) manner without a central authority controlling the network.

Some examples of centralized applications in the cryptocurrency space include centralized exchanges (CEXs), where users can buy, sell, and trade cryptocurrencies with other users or with the exchange itself, and centralized wallets, which store users’ private keys and control access to their cryptocurrency holdings. While these centralized applications are convenient and easy to use, they can also be vulnerable to security breaches or censorship by the central authority, which goes against the decentralized and trustless nature of cryptocurrencies.