I'm quite worried of how well this federation system will work in the long run, especially when more people coming from Rexxit. As people make more post/comments, every federated instance will have to cache more redundant contents from each other, which also will use more storage thus increasing the fee of every instance hoster. There's also another problem of visibility in search engines. Because Lemmy/Kbin can be hosted by anyone, it makes searching on a specific domain impossible, unlike how I can just add "reddit" in the search query. Also since there are multiple Lemmy/Kbin instances, there's a chance there'll be similar communities spread over, fragmenting the communities even further. Until they can find a way to fix those problem, I don't think federation is suited for large scale communities.

As for fragmentation problem, maybe adding a global search for communities like this will help reducing fragmentation. Users can still make their own community in their instance, while other people who don't need to can easily find the community they want.