I found I had problems initially until I properly sorted out caching. Then I threw a few hundred visitors at it and it's been fine. $10 would be OK for small communities I think, but you're right in that big communities will need big servers.
What problems are you having with federation? The news here is posted from Lemmy.world into fledd.it, then federated back to kbin.social: https://kbin.social/m/worldnews@fledd.it
@jbenguira after fixing the image thing, my main feedback is that it doesn't run that well on the single core 2Gb ram option. It does run, but pretty slowly.
The dual core 4Gb ram version seems to run reasonably well, but I haven't put it under proper load yet.