I think best case scenario, you have themed instances based around art, tech, politics, news, gaming, food, etc, and the largest communities are hosted there.

This just leads to the same problems as reddit - mods and admins controlling their echo chambers. It’s essentially centralization again, just with more steps.

What there needs to be is a way to have communities shared across instances, that way if one instance’s mods/admin want to go ham fisted on the censorship because they don’t agree with what’s being said, the users aren’t forced to go try and create another community somewhere and start from scratch, which very rarely works.