If I understand Lemmy correctly, you can create duplicate communities on different instances. Isn’t this kinda counter productive because this may lead to less user interaction in those communities, because the user base gets split up between competing communities.
Is there a way to fight this division of the (small) userbase or is this effect even desired because it leads to more tight knit communities on the different instances?
Yes, limit instances to X number of communities. Forces people to use the search function properly, stops the large instances having all the communities, also has the positive effect of the user base spreading out rather than congregating on one or two big communities.