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Why is defederation an option when Limit/Mute exist?
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I do think there could be some features added to help avoid full defederation. Like if instance admins could set a default list of banned instances, and the users could choose to unban those instances for themselves. Of course defederation could still be necessary sometimes like for illegal content, software bugs, or malicious attacks.
"Like if instance admins could set a default list of banned instances, and the users could choose to unban those instances for themselves.”
Which is exactly what a list of limited instances would allow the user to do.