There must never be a single dominant instance. If one instance becomes too large, they end up having too much influential power. And with all that power, big corporations or power tripping admins will use that power to coerce other instances to do certain things. "Don't want to follow our unilaterally-imposed rule? We're gonna cut off your entire instance and your users will lose access to our communities."
If Meta doesn't get defederated, they will become the dominant instance. They already have the most amount of users since I'm assuming you can use your Facebook/Instagram account, they'll have the most amount of user activity, and of course the most amount of power.
I'm jumping between Reddit and Lemmy. Some subreddits have all of their mods booted out (r/GoCommitDie and r/OpenAI are two I can think of). Some subreddits have decided to flag their subreddit as NSFW but are being threatened by Reddit to reverse that move, and many have returned to business as usual.
Let's face it. We've lost the API protest. All we can do now is make Lemmy popular and make it attractive to other users. Give people an incentive to actually join here. Our job here is not to make Lemmy a copy of Reddit. We need to make Lemmy different (in a good way!).
And here's an unpopular opinion: we need to make Lemmy easy to use and understand. If normies find Lemmy difficult to use or understand, then we're fucked.
My personal opinion is that normies might get confused by the fediverse and might be turned away by thinking they need to make an account on every single instance in order to participate in them. I am not proposing that we get rid of federation. What I am proposing is that we somehow make it clearer to everyone that all you really need is one account and you can get access to everywhere. I don't know how we can do this, but I'm sure there is someone who knows.