Ideally I prefer a consent model, where each user has a list of other users they approve of, and a list of users whose lists they approve of (which may be identical.) That's what social networks were sold as. Servers should be dumb providers that are primarily worried about bandwidth.

Sure, it cuts down on serendipity, but if you want that, you can subscribe to serendipity345's feed which will add anybody who asks, and will autodelete based on the proportion of bans issued from list subscribers (or a selected council) on a particular user, card-check[0] style..

Federation at the server level is a poor substitute for the lack of finer grained governance tools.

Democracy and auctions are a last resort when you can't find a real solution. They ensure a type of fairness, but have awful failure modes. The ideal situation is when people are only exposed to what they want to be exposed to. The dangers of filter bubbles are 1) who controls them, 2) how they distort the information used for decisionmaking, and 3) who controls them. Absolute, dynamic control of your own filter bubble might make you stupider, but you should have the right to be stupid if you want to be.

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[0] Under card-check, when the majority of people in your shop sign a union card, you're a union shop, no need for an election.