On the one hand, this is indeed what is happening now, the largest instances for lemmy and kbin are taking the vast majority of the new users. I think though that this is because people are signing up before they know what they are signing up for.

I think the point stands that while these large servers can handle the load while still federating fully, it's not a real problem. The problem with classic centralised systems can be seen with reddit right now. People are leaving because they are enforcing changes on people and there is no alternative. Whereas here, if these larger instances decided to place some draconian measures, people could simply say "no thanks" and sign up elsewhere. That is not compromised by having huge instances. I don't think these things can end the fediverse though.