Now if you do host for yourself then you can federate with other instances to subscribe and pull from their communities which does reduce the total load on those services but that is about it.

That is the main thing I'm doing, personally.

Communities are going to Win/Loose based on personalities and critical mass, and the people hosting those communities will just have to increase their hosting needs.

Speaking of hosting, I got to thinking what might happen when a community needs to move to another server. I wonder if some day we'll see a solution similar to Mastodon's where users can move their accounts and/or entire communities between Lemmy instances.

It does give you authentication security in that, you should only have an issue if your instance is down. If the instance your account is tied to goes up and down then your ability to access your subscriptions and participate are also up and down.

I wish the identity stuff and authentication was separated from instances, but unfortunately it isn't.