this post was submitted on 12 Jun 2023
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Your account credentials are the keys to your house, you can only enter to your own house (server/instance) with your keys, but can watch through everyone's window (the owner of your house can block some specific windows tho).
So your second assessment is correct, and yeah I think if the server goes down your data in that instance may be lost. It shouldn't pass long time before some migration account feature (mastodon already has one).
Great ELI5, thanks.