I agree that it's not ideal to be hosted on a platform controlled by Microsoft, but it's just a fact that you lose 90+% of contributors if you are anywhere else (there's an article where someone compared, can't find it right now). It's not great that that's how it is, but you need to choose your battles.
I'm not really very concerned, since git itself is decentralized, and if Github starts causing visible problems moving somewhere else is not a huge problem. Also VPNs exist.
The ActivityPub protocol lemmy uses is (in my opinion) really bad wrt scalability. For example, if you press one upvote, your instance has to make 3000 HTTP requests (one to every instance that cares).
But on the other hand, I recently rewrote the federation queue. Looking at reddit, it has around 100 actions per second. The new queue should be able to handle that amount of requests, and PostgreSQL can handle it (the incoming side) as well.
The problem right now is more that people running instances don't have infinite money, so even if you could in theory host hundreds of millions of users most instances are limited by having a budget of 10-100$ per month.