The goal of implementing this feature is to leverage the benefits of federation. If we wait until there is only a few big communities, the purpose of having federation becomes irrelevant. When an instance hosting one of those large communities shuts down, the community would have to migrate to the next major community.
By proactively implementing this feature, Lemmy can harness the advantages of federation while actively mitigating the challenges posed by community fragmentation and echo chambers. It provides a centralized hub that encourages cross-pollination of ideas, fosters community engagement, and ensures that valuable content is accessible to all users, regardless of the size or popularity of individual communities.
There is a list of federated and blocked instances on the bottom of the page. https://latte.isnot.coffee/instances
Also this script is to see which instances block or are blocked by the instance you choose.