In my opinion, there are two big things holding Lemmy back right now:
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Lemmy needs DIDs.
No, not dissociative identity disorder, Decentralized Identities.
The problem is that signing up on one instance locks you to that instance. If the instance goes down, so does all of your data, history, settings, etc. Sure, you can create multiple accounts, but then it's up to you to create secure, unique passwords for each and manage syncing between them. Nobody will do this for more than two instances.
Without this, people will be less willing to sign up for instances that they perceive "might not make it", and flock for the biggest ones, thus removing the benefits of federation.
This is especially bad for moderators. Currently, external communities that exist locally on defederated instances cannot be moderated by the home-instance accounts. This isn't a problem of moderation tooling, but it can be (mostly*) solved by having a single identity that can be used on any instance.
*Banning the account could create the same issue.
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Communities need to federate too.
Just as instances can share their posts in one page, communities should be able to federate with other, similar communities. This would help to solve the problem of fragmentation and better unify the instances.
Obviously there are plenty of bugs and QoL features that could dramatically improve the usage of Lemmy, but these two things are critical to unification across decentralized services.
What do you think?
EDIT: There's been a lot (much more than I expected) of good discussion here, so thank you all for providing your opinions.
It was pointed out that there are github issues #1 and #2 addressing these points already, so I wanted to put that in the main post.
Taking an opportunity to post a lil off-topic because somecritter's finally supporting a touch of calm around here: yesss, give it some time, people. Give yourselves some time. Let things (and people) settle some before judging and pushing in every direction at once.
[General comment, not directed at anycritter in particular] It's getting kinda tiring that so many people are in a big huge rush around here expecting everything to be some form of "just right" right now. People don't seem to be giving themselves or others time to figure out what's going on, how things work, how things should work, and there's a ton of excitement and pushing for things to go this way or that way or whatever but most of them don't even seem to know what this place is, what federation means, how things work here, or even what instance they're on or posting to at any given moment. There's a lot going on that needs time to play out and it's not all going to be obvious to everycritter immediately.
This place (what should it even be called? This one is looking forward to having a useful name for federated-not-Reddit-thing :'D ) doesn't need to replace Reddit right now. There is time to work out what it is, what it can be, and what it should be. A bit of patience will enable sensible progress.