This isn't really that huge of a blow, it's a learning curve sure but just because some people made dumb decisions on what TLD to use based on something they decided it means (and backtracked to say they chose it because it was free, I know) doesn't mean federated platforms don't work. Actually imo it points to the strength of federation that we can still be here using lemmy on our instances while they switch.

All this really did was teach instance owners (who this might be their first experience hosting things too btw) that you have to use a TLD that is more stable like a .org, .com, .net, etc over a "free" one, and this is afaik the first instance of something like this happening, so honestly they didn't have precedent to base this on before.