So, again, I’ve got an impressionistic understanding.

The big central server, AFAIU, can be decentralised. How multiple such servers share data with each other, I don’t know. But, AFAIU, policy choices can be made at the level of the big central servers about what content or users they allow etc. But the idea is that moderation decisions will be made by downstream services. And the expectation of course is that the cost of running such a server would be prohibitively onerous except for a few instances. So it’d be a soft form, oligopoly like, of decentralisation you might say, if anyone actually makes one (currently there’s only the BlueSky big central server). It’s an interesting question though how small a community would be necessary to collect the wherewithal to start a new one.

Otherwise, the idea, AFAICT, is that it’s just a service and not intended to affect content and users much, which is instead up to all the downstream services which are intended to make up the actual user experience. The idea is that these layers will be open and decentralised. AFAIU, BlueSky is technically already decentralised now, under the hood, as to test things they’ve split the platform over multiple instances. I’m pretty sure their equivalent of an instance is something anyone can run (where BlueSky the app is open source). So it’s some form of decentralisation I suppose. I haven’t seen any breakdown though as to what community building facilities, tools and powers are available from the system. That’d be interesting, especially in comparison to the fediverse. I've seen it predicted that as BlueSky opens up there'll be a migration of some sort to the fediverse as vulnerable users begin to suffer from abuse that the fediverse offers more protection from. But BlueSky is also a moving target.

I suspect the big eagle eye perspective is that the fediverse leans more "balkanised and independent servers" and BlueSky (or at least the promise/idea of bluesky) leans more "distributed public square". In the push away from mega social media platforms, I think there's probably a need for both to exist, at least in the interim as this whole "transition", which is likely more lengthy and chaotic than many would like, pans out.

In the end though, bluesky feels like a more fragile project. They're a bit "late to the game", clearly have only a small team working on it, without a particularly compelling platform, and a little like the fediverse, have a slowly/slightly slipping away user base at the moment. There's a real chance we won't be talking about it in 2 years time. It could also do really well and suck the oxygen out of the fediverse in the same time TBH. In reality ... this whole thing may just take a while to shake out.