I think users are jumping over to instances that more fit their personal values. Its why I left lemmy.world and created unilem.org. An instance for no defederation. It might not be for everyone. But i prefer to be able to access everything in one place and do thr moderation/blocking on the user level.
Im aware that my server may cache illegal content. However this is usually easily delt with. It can simply be removed/user banned and can be purged from the server. This can all be done from the admin settings.
I also dont see the main instances defederating us. Our server will be moderated just as any other main lemmy server would. Just setting it up so that the users from our server can intract with any other server they wish. Any content or anyone who breaks our rules will be removed/banned. Just because we have an open federation policy does not mean there will be a lack of moderation.