Imo, defederation isn’t the exile sentence everyone is making out to be. It is used like you said as a bandaid as a moderation tool, but really just about “anyone” can boot up an instance and have complete agency on which Instances are visible.

I’d be more concerned if all the big instances ganged up together to form a whitelist club, but this this is a more complex discussion, and there is no sign of it happenning.