That is such a take.

The point of federation means that even an instance with just a handful of users, can participate in larger communities on other servers that may have thousands of users. From that thousands of users, may also include handful of users FROM other instances. That's the beauty of federation. While a community needs to be on one instance, the people do not.

I'm on a server with <50 users, and yet I'm still subscribed to the larger communities, and enjoying in delightful conversations with people such as yourself. Why am I on server with <50 users? Simply because it performs better, and through the magic of federation, doesn't require me to have to register to a server halfway around the globe just because everyone else is there too.

I have no idea what led you to believe that there's no use-cases for smaller instances, and I would definitely like to hear the arguments behind it.

Again, for the purposes of smaller Lemmy instances (< thousand users), there is hardly a requirement for any kind of load balancing. Having one, is my definition and rationale for calling it fancy. It's over-engineering a solution that is not a problem for majority of instances. Your arguments thus far would apply to larger Lemmy instances, even Reddit-lite, but that's not what federation is about. It's not a bunch of large instances forming a fenced community and gatekeeping the tiny ones out.