Yes, it still does authentication. It's just about hosting the data, which might make sense for niche scenarios with well defined scope. Unfortunately, many data-driven systems need some kind of data sharing. Relying on data from multiple custodians is possible and could be cool but brittle if a single view is pulling data from many custodians. Also it would be impossible to run meaningful analytics on such scattered data... I guess that could be seen as a feature.

I think this may end up happening naturally over the next decade or so thanks to AI coding. People will just stick web components bound to different data sources on the same page without even realizing it. Data can be joined and chained together on the frontend. Some shared authentication standard like JWT with asymmetric key signatures could potentially facilitate that. Multiple data custodians could verify the same JWT using the user's public key... Account could be hosted on some blockchain so it's not centralized.

It might be helpful here to categorize the data as sensitive, personal, financial, chat, public comments as such and then apply the probability model on a given category. I would probably call the AI coding as misnomer too, what you have is a higher level of auto complete functions and natural language processing.

Theoretically even I love the idea of independence, however practicality of such a thing has to be evaluated. From all the examples that exists as of today, a true and meaningful decentralization is not viable in the absence of a a trusted centralized component.