The issue to that is some moderation is mandatory by law, e.g. CP, copyrighted works. So mods still have to have the ability to remove data from the instances server completely, not just hide it. And instances probably also want to be able to have enforced rules on top of that.
I think what could do better is federating on communities level. So if you post or comment to memes community, it can post or comment to version of the community on multiple instances, each with different moderators.
The issue to that is some moderation is mandatory by law, e.g. CP, copyrighted works. So mods still have to have the ability to remove data from the instances server completely, not just hide it. And instances probably also want to be able to have enforced rules on top of that.
I think what could do better is federating on communities level. So if you post or comment to memes community, it can post or comment to version of the community on multiple instances, each with different moderators.