There is no magic loophole, but I don't see how this would get "sued into oblivion". There is no "central instance", so even if someone sets up a server which starts to make copyrighted material available publicly, only that server would receive nastygrams and/or be ejected by the hosting provider.

And those that really want to circumvent the law could just set this up in a place which offers more protections. If someone sets up an instance on 1984.hosting and uses a domain from njal.la... how would anyone be able to take it down?

Same way they did it the last 20 years.

They don't need to understand the fediverse to sue everyone and than everyone will disable the feature or adds some filter

They can't "sue everyone". BitTorrent is a lot easier to track and prove illegal sharing, yet it still continues to work.

Yes but plenty of people got sued at least in Germany.

People moved to Usenet providers but that traffic is much less than it was 5 or 10 years ago.

You've moved the goalposts. "Some people got sued" is a far weaker than "Funkwhale will be sued into oblivion".

I don't think so.

As soon as the industry gets wind about this practice people or servers or companies will get sued (there is after all nothing else these companies can do) and as soon as this happens some people in the line will try to protect them.

Could be server hosting company, the server hosters, source code Providers etc etc.

Btw that doesn't change the law: dependimg on your country there are already clear legal rules regarding lending digital copies to your friends.

They might fake users and start collecting data through those etc.

But only if it becomes a thing.

I think the main reason I'm not seeing anythinguch about lawsuits today is due to streaming services and the amount of legal media traffic compared to things like torrent.