Oddbean new post about login | logout I think you read it totally wrong. NIP-98 is just a suggestion of how people can authenticate to single specific centralized server APIs. It is not relevant for pure Nostr clients that talk to various relays with websockets.
NIP-98 is probably not even worth having as a NIP, since it confuses more than it enlightens. It is not necessary to have a standard there since no one benefits from it as each server is completely isolated and uses it in specifically different ways.
So in the case of LNBits, NIP-98 is used to auth with nostr, Is that what you mean by centralized server. Since there is an LNBits API for NIP98 login (afaik) , it means that any nostr client, can auth to lnbits ..... so if this is not the correct interpretation, let me know