@GLaDTheresCake That is indeed how moderation works.
When a racist or other type of unacceptable comment is posted one is able to do something about it. Remove the comment and reprimand or block the sender.
An instance that is clearly a hotbed of hate spreading individuals will indeed be de-federate. That is very effective to block the reach of those comments.
This is how the #fediverse works and how things work on any other online platform.