I've never quite wrapped my head around how any federated network would compete with centralized social media platforms, it feels like a solution for a different use case

Federation means we have numerous copies of every single post ever shared floating around somewhere, that's a massive waste of resources IMO. Similarly, the amount of network traffic grows exponentially as the number of full nodes grows and again wastes a ton of resources. Those kinds of issues could be mitigated by limiting the number of full nodes on the network, but then you are driving towards a centralized system again.

Federation works really well when the different groups are infrequently interacting. Sure there could be a mechanism to jump into another circle, but if federation means multiple servers needing to know the entire state of the world the scaling and coordination problems just don't seem worth it.

Do you think Instagram backs up their databases? Isn't that "multiple copies floating around"?

I don't think it's really that big of a waste..