Federation solves nothing. The problem with the current generation of social media is quite simply the profit motive. Elon Musk tried to make a big deal out of being a free speech absolutist, but his company is run for profit and any time free speech butts up against profit, profit wins. Federation's only advantage is that the profiteers haven't invaded that space yet, but Bluesky is loudly telegraphing that it will no longer be a safe space and they intend to start monetizing it.

If you want to a shining example of effective content moderation, public utility and centralization, then just look at Wikipedia. What's different about them? Non-profit.