It should be by geolocation/language and to not confuse people, the instance should be a lemmy.xx domain by default.
Lemmy
Everything about Lemmy; bugs, gripes, praises, and advocacy.
For discussion about the lemmy.ml instance, go to !meta@lemmy.ml.
You can't have a default server unless someone is ready to pay for it. (Idk how Mastodon does it.)
What I'd do is:
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have every instance list its most prevalent topics/communities/interests (technology, games, communism, memes...)
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when the user is signing up, have them select their interests
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try to find the ideal match. Let the user override if they want to, perhaps let them know if the community is tiny, requires approval etc, but other than that just show a "suggested instance: example.org, change link"
Mastodon is a company. A non-profit one, but they've had enough donations and funding for a while now to draw salaries for multiple people to the point that they were hiring earlier this year. The head of Mastodon even calls themselves the "CEO"! All of the instances that use mastodon software have to rely on their own donations from their own users. But mastodon, the central company, have enough money to hire and pay employees and run their own largest instance (by a long way) on the fediverse (which is not coincidentally the default instance to join in the app).
This is why it's insidious that they're brand has become so pervasive to the point where most don't know about the fediverse, only mastodon. It's heading toward a form of re-centralisation of some sort. And, with the current rate of user growth (checkout https://fedidb.org/), the majority of english-speaking mastodon users may in not too long a time be all on one central instance.