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Moderation is at the AppView level, not at the protocol level. If you create an AppView you can choose to use bsky.app's moderation, or use another app's moderation, or use no moderation at all, for the same base of user posts. Far as I know the relay does do sybil attack and CSAM mitigation, but that's about it, and there are other relays going up, each of which is free to choose how it tackles CSAM, etc.. Or an AppView can pull directly from a set of PDSs without a relay in between. Or a bespoke partial relay.
With a raspberry you could spin up an AppView in a few days that shows all the posts that the bsky.app moderation team has taken down, minus presumably the illegal stuff that by law they had to deal with on the lower-infra level.
Fiatjaf's argument would be that other Kind1 type clients are incentivised to just reuse bsky.app's moderation since it's way expensive to do one's own moderation, and that argument holds weight--but again the time dimension, we need to wait and see how this plays out over time.
First let's establish that bsky.app is not decentralized. They hold your keys and your data. If they disagree (morally or legally) with what you say, you have no recourse. Since they hold your keys, they can rewrite your history however they wish and it will be authoritative.
Your argument is really that ATproto is decentralized. First, I would argue that it's federated, as users have a "home" PDS. This is different than nostr, where you can spray events across every relay, or store them in a file, or send them to a friend over BLE, and they are *equally authoritative*.
Second, these ATproto apps aren't actually using ATproto: they're connecting to a Bluesky API. Perhaps they use a serialization format from ATproto, but they're simply asking nicely for AppView to take actions.
Third, it doesn't matter what ATproto is capable of, as people are there for bsky.app. Important features like account management, message deletion, and content filtering are done inside bsky and not using ATproto.
So, as fiatjaf points out, when bsky decides that doing everything in a truly decentralized manner is too difficult and sunsets ATproto, no one using the service will even be bothered.
Just like XMPP