nope, that would make the experience way worse with federation not working well with communities. like for example I've made a community over on lemmy.world and it has a couple of members and a few posts in it, but I can't see it from any other lemmy instances I've tried (unless it doesn't work if you're not logged in). you can kinda make kbin see it but to make posts appear you have to search for them and if you search for them before you search for the community, they appear in a random magazine and then when the magazine for that community is created the posts that were put in random stay there and never return... so yeah...

If there is a performance overload isn't that a natural block to more users?

Probably not. I understand the concern, but another issue is sending people to smaller instances which may end up disappearing. It's all run by small groups of volunteers or even by individuals, at least on the bigger servers you have, at least in theory, a lower chance of the instance vanishing (with your account).

I don't know if there are any plans to cooperate between instances for tech support/funding or if accounts can be transfered one day. Until then - a slow lemmy.world feels like the lesser evil.

yes, limiting users is one tool to encourage users to find another "home" instance that they normally use to browse and post so that the system as a whole can scale better