I think it’s a weird way to look at moderation as if it was democratic. Voting bad mods out is one thing, but I don’t think you can just vote new good mods in. Moderation is a lot of unpaid work. Even if a large part of a community is unhappy with a mod decision, removing the mods doesn’t mean there will be people with that much time on their hands to step up, and even if there are, it’s not easy to choose the good ones among them by a simple popular vote…
Some of the subs I was on had some elaborate setups with mod tools and bots and the mods were still quite busy. Replacing them with randoms who then also don’t have access to the tools would be entirely pointless.
My understanding is that if an instance suddenly dies, all the federated instances that subscribe to its communities will still have the text content because they store copies locally. So knowledge should not just go away. Media is a different story though.
I think new posts/comments in those communities would then not federate at all anymore since the host instance would not acknowledge them. So the communities turn into isolated local ones.
If the host instance comes back and the communities are re-created, they’ll be empty on the host instance but I think other instances won’t delete the old content unless explicitly requested.