I honestly hope lemmy will not die. It will have to become simpler though. For many people, it will be simply way too complicated to wrap their head around the fact of many instances and most of them will worry about not being able to interact with people from other instances.
Also, the main lemmy web app is not necessarily good and alternatives such as wefwef are far easier to use.
We just need to be better about simplifying the explanation. Don't tell people "it's a federated website using an activitypub backend to communicate like mastodon, but only links to federated lemmys not including mastodon instances...." Tell them "it's a fourm that shares posts and comments with other fourms that agree to work together". If they want more detail they can easily find it themselves.
Federation is the invisible glue that makes it all work.. I have my own server but i can talk to you on lemmy.world without having to think about it or do anything special. Most people joining in the future won't need to care federation even exists, just like they don't care SMTP exists.
That said I suspect there will be a few mega servers anyway.. just like gmail.. people seem to like being where everyone else is.
I feel like the explanation using email as an example works pretty well. Most people understand how different emails from different providers can communicate, but their account is hosted on one platform.
Even better is to talk about phone carriers, because people seem to know those better than emails these days.
"Just because your phone is using Carrier A doesn't mean you can't call your friends on Carriers B and C"
I think the main thing that will help make federated services more mainstream is a simplified way of self hosting. When running your own web server is something so easy anyone can do it, then running your own Lemmy/Mastodon/etc service will be easy too. Then you won't have to worry about finding an instance or what instances have defederated with the instance you're joining. Self hosting is currently too difficult for the average user who just wants to log in and have things work.