It’s really similar to a market with the exception that there isn’t really any competition between instances. When you choose an instance you buy into small authoritarian system where a tiny group of people control the platform. You can switch instances if the Admins or Mods do something you don't like but if you ever succeed in finding the right instance depends on whether that instance actually exists. This way of decentralization just divides one authoritarian system into many. (2/3)
I think in the long run there might be a better way. You could decentralize control while centralizing data. One could setup a central service that is operated by a co-op. Every user can join the co-op and co-own the platform. In fact all users could be part of the co-op and decide the direction the instance is heading in democratically. You could still have multiple servers but you wouldn't need that many because now users actually have control. (3/3)