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The DALI standard suggests a separated power supply, because the DALI control lines are not galvanically isolated, so mains voltage may appear on the lines (and the standard suggests that DALI devices should tolerate this).

The most commonly-followed application note I see is this: https://www.mouser.de/applications/lighting-digitally-addressable/

Microchip DALI application note

It has optoisolators providing 3.7kV isolation, but it also directly powers the DALI lines. In this situation, what's the point of the optoisolators?

Jon Bright
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Where you saw that it directly powers the lines?

The only parts connected to +5V and GND on this circuit are both after the optoisolators, on the "safe, isolated side" of the circuit, so it is isolated.

But bear in mind that this circuit was not designed to withstand mains AC, you can find more rugged solutions if you search for it, for example: Need help understanding DALI circuit and 220 VAC protection