If you get rid of open registration instances and start charging, you’ll immediately lose huge amounts of users back to Reddit or whatever alternative is free to them. The echo chamber will be even more pronounced, and whatever success Lemmy/Mbin/Piefed have had will dry up.

Most people don’t want to self host. And most people aren’t willing to pay. So you have an issue in front of you. Do you actually want users and interactions? Or do you just want a place where very dedicated nerds can crow to each other about whatever self-hosting tricks they pulled off while occasionally backed by an addicted whale (who, upon noting the monotony and small userbase, will probably move on quickly)?

Everything, especially digital things, is backed by a small group of whales supporting everyone else. It’s a mix between addiction and community-building instincts. Right now, said whales are the server hosts and a handful of users. Because of the desire to lead a community, and the addiction of social media, it keeps going. You say it isn’t sustainable. I say it’s a cycle. The specific instances don’t matter until it becomes a corporate situation. All that matters is that there’s at least one instance with enough people active to provide the gratification to the whale.