Democracy means allowing the people to decide, as opposed to authoritianism where a central group (mods, admins, facilitators or whatever) makes all the decisions for people. PieFed still allows for authoritian control, mind you, e.g. on PieFed.social (the flagship instance) both hexbear.net and Lemmygrad.ml are defederated. But in addition to that, this opens up a new possibility where someone who is perhaps controversial yet not over a hard line can be allowed to remain, yet merely labelled.

And then people can decide for themselves, rather than solely an authority figure, what they wish to do about it. You are free ofc to debate whether this is "good" or "bad", but either way it does seem more "democratic" to me, bc it places the power and therefore responsibility into the hands of the user to decide.

Which is sorta how our brains work anyway all the time, so these icons act as a shortcut to help jog people's memories or realize something about the target that they would eventually figure out anyway.

The point is that the icon means... whatever you want it to mean. A "new account", a "potential unregistered bot", a "noted controversial person" - the authorities no longer control these meanings, only the recipient. Hence "democracy".