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What I think could help against instance protectionism:
A.) Better moderation tools to protect against SPAM and trash
B.) Better curation algorithm, especially for smaller instances, to smartly curate posts that are relevant to the user
C.) Better default-values for the selected feed (All instead of local), as well as for the discovery of communities (which is also currently local by default)
If B is not realized, smaller instances will have no handle against big instances flooding their user's feeds with their posts and they will switch back to local-default again.
Overall, it can be brought down to making the All-feed more attractive. In my opinion, there should only be the subscribed-feed and an all-feed with curated posts (with different sorting algorithms to chose from in the best case). Or at least these should be the main ones.