Personal data storage can be decentralized, although that's missing the social part of the social network.

Identities are set up through a centralized system that in theory they could change, but I wouldn't bet on it.

Relays supposedly can be decentralized, but need to handle all data on the network. So they require massive hosting costs that keep going up as more people use bluesky. Only large corporations can likely afford to run them, and that hasn't happened yet.

they're using decentralized like it's a marketing term hoping to draw in people who are sick of the enshitification we get from the likes of reddit and facebook.

bluesky has already enshitified imo ever since they started censoring gazan users for reporting on the genocide by pretending it's all spam.

People talked about this yesterday. It is not decentralized, and based on who is in control of Bluesky, in my opinion it won’t be: https://lemmy.ml/post/22830283/15144160

If I understand it correctly, it's "federated" in the sense that you can create similar infrastructure to Bluesky's using ATProto and have your posts show up there, but that reality seems pretty academic because not many people are doing that compared to Mastodon.