Stupid question: when people inevitably use this for pirate content, and the feds try to shut the service down ... what's the plan?

They can't shut down the service because there is no single service. They can go after individual servers, and that is fine. The admin is responsible for what happens on their server.

Why would an admin run a server if they might have the feds knocking at their door? Sure, people might run nodes that host only their content, but they sure are disincentivized from running any sort of shared service.

This is the same problem as TOR exit nodes and why 3 letter agencies run most of them.

This is the same problem as why an admin would run a forum if the feds might knock at the door, or why an admin would run a website about cats if the feds might knock at the door. It's an overblown fear.

Maybe the live where the feds can't get them?

The feds will go after the instance admin that is sharing pirate content.

> The feds will go after the instance admin that is sharing pirate content.

Unless the service is behind some company name and it was not the admin who upload the stuff. Then suddenly you are just a cloud provider whose job is just to cooperate with the copyright owners.

Someone is still hosting the content and paying for resources just like with every other service distributed or not so it doesn't really add anything new to the equation.

The plan is the same as it always has been. It's no different than running an open FTP server.