Having some sort of democratic non profit behind it like codeberg which seem to be doing really well (or like a cooperative bank), anyone can be a member as long as he pays fees that help projects for the instance (which could include paying bounties or freelancers for lemmy feature development). You would have a election where you vote for a board of directors or even just one “instance leader” or something like that and he or they decide what to fund or what mods to appoint or impeach. You could copy codeberg bylaws and it might actually work.

You could argue just letting basically average people elect management would lead to incompetent management (plato made the same arguments, your in good company), but this model has it advantages and seems to work well . The American Association for the Advancement of Science uses this model and created one of the most well regarded science journal in the world (science)