A central account instance rather defeats the point of a federated system.

Does it? Would it not be possible for a minimal global account system to exist, which ONLY handles logging in and identity? Any user-related data could still exist in instances, not centralized.

I am pretty new to this type of system so maybe I am wrong but it does seem like both the biggest barrier to wider adoption and rather solvable: in current terms, imagine if the "login" instance had no communities, only account log in, while other instances have no log in, but integrate the "central" one. In case decentralization is wanted, I think it'd be possible to have multiple "login" type instances exist in a consensus, at which point problems and solutions start looking similar to cryptocurrency, but without the need to deal with "currency" or any of those ethical landmines - it'd just need to do the task of multiple instances agreeing to dataset of existing users.