I get the idea of instances, like you can make your own and this is good for privacy. But some lemmy instances are much more popular and this in fact makes it another Reddit. If there are separate instances for niche topics, why not make it another community inside a larger instance?
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GDPR does not apply here. Content that people write on a forum does not count as PII. If you are not sending your users’s IP or email addresses to a third-party, you have nothing to worry about.
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Also applies only to personal information and not to content generated by the users.