It would be less of a problem if we as users on an instance could block entire instances, effectively defederating it just for our user. Then those running instances could defederate only in severe cases.
Blocking an instance on a user by user basis has a key drawback in the sense of those instances you block can still influence the posts and comments via up and down votes
Defederating basically means that those instances no longer have any influence on the community you're a part of
Basically think of it this way, say you're on a queer friendly instance that is still federated with a right wing instance. That right wing instance can manipulate the posts of the queer friendly instance by up voting queerphobic content and down voting queer positive content. And you block the instance as a user those votes still federated over so you'll see queer positive content getting down voted to oblivion.
I can't wait for Lemmy to catch up with Mastodon in this regard. Between this and not being able to easily migrate your account to a new instance, it doesn't feel like Lemmy users have as much of the freedom that the fediverse can provide.
Would it though? I understand that the main reason for defederating is to avoid your instance downloading CSAM posted in another instance, which could get an instance maintainer in legal problems. Allowing users to block entire instances won't help, because the illegal media will still get downloaded by the instance.
IANAL, if subscribers had a decryption key, and the instance only stored encrypted copies of the media, would instances still be liable? Kinda-sorta like Tor relay-only nodes; it seems like only exit nodes get in trouble.