I think this is the better question - will teens stop participating in grown-up spaces just because there's a 'safe' version just for them?

However, for younger kids (say, 5-11) I think a separate environment is the best solution. Up to a certain point, parents have more influence on what their child does. For all its problems, most parents I know are comfortable with YouTube Kids because it's the lesser of two evils. I know that my child is going to participate in social media either way, so I want them to do it in a sandbox until the day I don't get a say.

I think you are right, but it allows parents to say "you can get instagram for kids" as a way to compromise.

Kids will, teens won't. Starting from about eleven or twelve-teen.