When a system is centralized, it means that the planning and decision-making mechanisms are concentrated at a particular point within the system.
Understanding the Term
In crypto terms, a centralized system refers to a specialized network that is structured in such a way that all orders, whether they buy or sell orders, are routed through a central exchange that has no other competing market for those particular crypto assets.
In centralized cryptocurrency exchanges, a third party is employed to assist in completing transactions and managing their assets in a similar way to banking.
In a centralized system, a central point of power authorizes and enforces decisions, which are then passed down to lower tiers of power. The opposite of a centralized system is a decentralized system, where decisions are made in a distributed way without the coordination of a central authority.