If I remember correctly, they defederated because they wanted to keep the instance similar to how it was before the Reddit Migration. I might be wrong tho.
As I know, they defederated, because of open registration policy, here's a full post https://beehaw.org/post/567170.
The point stands, federation doesn't work as of today.
The point of federation is not having to browse each instance seperatly. If each instance defedarates from every other, all you get is bunch of small Reddits. Defederation is a feature, but if you have to use it, to combat open registration (standard feature of every website), then something is wrong. Even if that wouldn't be the case, I see a lot of instances defederating, because they don't like users or content of other instances. Which makes you think, what was the point of federation in the first place?
Imagine any other federated service like emails doing it. You want to register on a website, but no, website defederated your email provider, and you are forced to use their email. "Oh you can just register multiple emails" is not the answer anyone would accept.
100% agree. I really hope Apps will bridge this divide and allow a seamless experience across instances that have defederated. Heavy fragmentation may stop lemmy from succeeding altogether. The biggest draw for any social network is numbers. Small isolated instances will just naturally evaporate most of the time.
I might start my own instance with the policy to never de-federate.