In general, it works pretty nice, but there are some limitations.
The biggest one for me is discoverability. The federation means that there is more fragmentation and it’s harder to find the right community for something.
For example, there are country/city communities for my country/city on multiple instances. And since it’s hard to find the “correct” one, it fragments out much harder than Reddit did. Combine that with generally lower attendance numbers and you get really tiny communities.
This is not aided by Jerboa, which doesn’t open internal links internally. So if someone posts a link to a community and I press it, it instead tries to open it with my email app.