I don't think donations and cosmetics are enshittification. Ads and pushing for infinite growth are. Absolutely would love for something else to be viable too though.

That's a good point. The federation part makes it trickier.

The reddit gold model didn't work. Reddit was a VC funded start up though, so if was expected to make a lot more than just enough to keep the servers going.

I'd bet lemmy instances can get by on donations and reddit style awards. Like you say, it can be incentivized further with cosmetic rewards.