That's correct. Defereration is a moderation tool. There are instances which explicitly cater to bad behaviour and they will be dropped by many others. It's fine. (Yes yes, it's not perfect and random problems do happen)

It's actually problematic when instances get too large to fail (like the two biggest mastodon ones), because when their mods cannot cope anymore, you can't realistically ban the whole insurance - too many users would be affected.

But that's still better than a single global namespace where you have to deal with single accounts every time.