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Yes, notarization is only for apps distributed outside the App Store. Apps distributed inside the App Store have a different screening process.
When notarization was first announced, Apple implied that apps would not run at all on Catalina if they weren't notarized, which posed a problem for apps like Sigil if notarization proved too much of a pain in the behind for developers to implement.
Discussion on the Internet suggested there would be ways around notarization, including resorting to a Terminal command to disable Gatekeeper. Fortunately, that's not necessary as Apple has provided a simple, straightforward way around it.
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