I think if the smaller niche instances reflected a wider variety of interests so people could choose to belong to an instance the way people now belong to a subreddit, that would help. Right now there are only a small patchwork of instances that even have a basic level of users and uptime, and those might be targeted at specific identities that aren't widely relevant outside that niche community. Ideally people will bump around in one of the bigger instances, discover communities (and handles/domain names) that represent them, then migrate to that community. As long as migrating is mostly friction-free, I imagine people will do it just to get a cool domain name the way we did with free email in the 90s.