Matrix, the central service, might work, but I’m not sure if it could handle the load well. Matrix, the federated service, hosted by many people, have performance issues with the “free” version. I could not test the paid/more optimized version, so I can’t talk about that.

Anyway, the protocol and clients have their issues. All these stems from usage; I did not do a deep dive in the internal of it. But on the top of my head:

• joining a room will sometimes not send you keys to see older messages, despite being configured to do so. When it works, it’s ok. When it doesn’t, there’s little to no recourse.
• sometimes (rarely) rooms have to be upgraded to use new versions/features. So far it happened once (to my knowledge). The issue is that “upgrade” means locking the existing room, creating a new one, inviting everyone in the new room, and putting a link to the old room as read only. Sure, the process is mostly automated… except the best way to start it is using dev commands on a client, and every user will have to accept the invite. Just hope you don’t have too much rooms.
• Logging into a new device/client sometimes will works perfectly fine. Other times it will obstinately refuse to retrieve your room’s keys from another existing, online, logged-in device. Despite the “confirmation” dialog, it won’t work. You can manually export/import your keys from one device to another, but for large scale adoption? Not good. You can say goodbye to all previous messages if that happens.
• Interface is relatively barebone, and some features gets pushed quickly (like, throwing confettis), while other (like, proper room management, fine notification controls, etc.) are held back forever.
• Features are limited. It works very well as a chat, and they recently worked on a built-in video/audio call service, but that’s it. A few “plugins” are supposed to work but are clunky as hell (they’re basically iframes). Some features that people consider important (like stickers) are definitively an afterthought, and searching for a sticker is a pain (dicslaimer: I’m not using the central service/app, so that part might be specific to my instance)

With that said, nothing’s actually a show stopper for small usage, and the heavily optimized server might handle itself well enough, as long as you’re mainly concerned with having text rooms. But open instances handling hundreds of users might be a stretch… for now. Maybe this will cause more development into the Matrix/Element ecosystem.