[rglullis]

(B) is subjective and it does not scale beyond an instance size on the order of Dunbar's number. If your instance is just for you and your friends, sure, go for it. But if your instance has enough people to fill a small village, you will quickly realize that the problem is not so simple.

[OkayPhysicist]

Subjectivity is fine, as long as there is a well-defined subject. In this case, its the individual or small group of admins with ultimate say in their instance. The nice thing about federation is that if you don't like the rules of your current instance, leaving is easy. If an instance doesn't like the rules of another instance, they can refuse to federate with them.

[beachy]

Slashdot's moderation used to be (maybe still is?) something like this. With meta moderators that annointed and oversaw the mods. At its heyday slashdot would have been far bigger than a small village - more like a giant metro.

That said, although /. lives on, it is only a shadow of its former self AFAIK. Perhaps that indicates unsustainability.