Does it resolve where your data is using DNS?
It uses IPFS. Somehow. I don't really understand, just that it stores your "ID" via some Web 3 stuff but other than that is a traditional client/server model where everything is on Bluesky's servers. The "federated" part is mostly theoretical at this point as they haven't opened to federation yet.
If a quasi-open source federated microblogging platform sounds familiar - you're right, this is just Mastodon with some Web 3 glued to it. Previously the only thing that made it "special" was the invite requirement meaning most people can't use it.
With that dropped, there's now no reason to use it. It's just Mastodon with the same problems Mastodon has, but, you know, originally created by Twitter devs. And with some Web 3 stuff bolted on to try and pretend it's "distributed." It's incredibly unclear what tying your "ID" to "Web 3" provides and why it's any better than ActivityPub.
Ironically, the only way to really see if their "you can take your account with you to a new service" claim works would be for Bluesky to collapse, and given that their monetization model is -- selling domains, I guess? -- it seems like we won't have to wait too long once the venture capital dries up for that.