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Several things went wrong: 1. Blocklists are one-sided, can't be removed, and allows power users to blanket ban and slander others, taking control of the network. 2. It should never have implemented dedicated moderation. Moderation should be handled by node owners and users.
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They did decentralise verification a tiny bit. e.g. some accounts are verified by news orgs/the EU rather than @bsky.app itself. Trusting your own additional verifiers like witchsky would be ideal, but would be confusing to most users. mu adds their own additional verifiers too.