My prediction is that manually reviewing user creation won't scale to a high level and unless systems develop spam detection and reputation management similar to email then it's not going to be limited to just one or two bad instances.

Its trivial to create my own instance with a new domain and there's no limitations against sending ActivityPub messages to a server. Unfortunately the simplest fix is for big instances to restrict what instances can communicate to it, but that causes centralization.

Plus, we don't need to be huge. There's no benefit from it.

The benefit is breadth and depth of communities. Reddit is great because if you are interested in a topic, there's a bunch of people talking about it.