> They get more valuable the more people are on it. Imagine a platform with 100 people on it. Nobody's going to put effort into putting content on that.

Self-hosting and network size are independent. What matters is how many people use the protocol.

If Alice has her own instance and she's the only one on it, she should still be able to go to any other instance and seamlessly make a post as alice@aliceserver . Then she (i.e. her server) gets notified if the people there reply to it, anyone there can follow her and have her posts from her own server show up in their feed etc.

If the protocol was popular then your self-hosted server that only five people use would be in a network with a billion people. See email.