I think this is the correct way of doing it. Anyone can start their own instance and their own federation.

It'd actually be a massive breach of freedom if you were somehow not allowed to shut out servers from your Mastodon federation—kind of like not having the freedom to block someone on Twitter.

Exactly. Anyone has the freedom to post whatever they want on their own server. I have the freedom not to carry their traffic.

email works the same way.

If I, as the email admin of xyzcorp.biz get too many spammy emails from your domain, you can expect to be blocked / defederated.

are we dismissing smtp now as a protocol?

that's not true at all. I've ran mail servers. It's really easy to block by domain, and I have.

Blocking each instance is the best way compared to other centered option.

no but it could be up to the receiver address to choose what to block.

That’s literally how it works now