Thanks for your hard work Ash, and sorry to hear about your loved one.
As much as I love the Fediverse, I think the culture leans toward instances that are too big. I think the number of people on each instance should be much closer to 1 than 1000.
The problem is self-hosting is too difficult for the average person. But that doesn't have to be the case. Self-hosting shouldn't be any more complicated or less secure than installing an app on your phone. You shouldn't need to understand DNS, TLS, NAT, HTTP, TCP, UDP, etc, etc. Domain names shouldn't be any more difficult to buy or use than phone numbers. Apps should be sandboxed in KVM/WHPX/HVP-accelerated virtual machines that run on Windows, Mac, and Linux and are secure-by-default. Tunneling out to the public internet should be a quick OAuth flow that lets you connect a given app to a specific subdomain, with TLS certs automatically obtained from Let's Encrypt and stored locally for end-to-end encryption.
Honestly I think some big issues are that not everyone has a fast machine thats going to be up all the time to host the instance. It would be cool to implement something like BitTorrent but for websites.