This isn't a hypothetical, Mastodon has millions of users now and it's working fine. Larger instances run on donation, and it works fine. It only takes a small percentage of users to contribute at the end of the day. The nature of federation also helps amortize costs. You don't need to have millions of users all on the same server. It's a different model where you have many smaller servers with thousands of users, and there's overlap between them. This is also how internet worked during the time of BBS and IRC. The model of big companies running walled gardens is an aberration, and it's not how things were meant to work. The internet took a wrong turn for a period, and now it's self correcting.