It is actually very easy to move your identity along with follows and followers from one Mastodon instance to another. I did it a couple times to finally land on my own instance I have running on a Raspberry PI.

Identity is always an issue in a decentralized systems. DNS can be used but not everybody owns a domain name. Ultimately if you want to keep your identity over a federated network you have to rely on an identity provider : Government issued, centralized platform that act as Id Provider (facebook, github, google, etc). I'm not aware of decentralized provider, maybe in a blockchain, there are a lot of writings on the topic: https://www.sciencedirect.com/science/article/abs/pii/S10848...

Well there's nostr

https://github.com/nostr-protocol/nostr

It solves this problem of being tied to a domain.

most federated projects work this way because of the homeserver model