I cannot explain the exact details but I remember during the first great Twitter exodus some people discovered a drawback in the ActivityPup protocol that seems to cause performance issues when very influencial users post on a small/under powered instance.

Because communicating all that stuff to many other instances is more costly than spreading it only to people on the same instance. So technically speaking large instances have a performance advantage and must just scale accordingly to the user number.

Everyone agreed that this need to change in oder to ensure a healthy federated ecosystem but I don't think it was be fixed by now.

The problem is most people are confused and overwhelmed by all the instance business to begin with.

It's a UX thing. Users can't be expected to read up on all the technical details of instances and the pros and cons of different ones before signing up. I don't know how it'd work exactly, but they really need a nice and simple "sign up" page that they don't need to think about.

Maybe a list of all the decent instances to use - meaning pretty much all instances that are not catered to a specific niche, open to new users and don't have any defederation drama ongoing - and then a global lemmy signup page can just randomly assign new users to one of those instances.

Yes, it definitely provides opportunity for bad actors to control Lemmy.

If reddit wanted to they could offer the admins of beehaw, sh.it.just.works, and lemmy.world money for control of the servers and then if accepted defederate the three largest instances from everywhere else, basically killing Lemmy or at least severely hindering it's growth.