Unless there is some kind of cooldown time (but even then), mods will constantly change...
Group A votes Mod B off and places Mod A there. Group B doesn't like that and votes Mod A off and places Mod B (or a similar) back.
The longer that goes on, the more users (and even Mods) will get annoyed and leave that sub. There will probably the be originalsub, splitsubA, splitsubB. All of these subs will be weaker than the originalsub was before.
So basically the same what we see in current politics. Instead of finding a solution together, it just creates larger gaps between the members.
It feels less like democracy but more like temporary dictatorship that oscillates between opinions.
A better solution would be to have multiple mods with different opinions finding consensus together. But that's easier said than done...
anyone knows if it’s cheaper to get random domain, just for personal stuff, this way
I think it's usually more expensive that way. What I've seen is that these are usually domains that might be of special interest. This is also the case in the one that I have seen. (In contrast to auctions of physical things like on ebay, that might have aged already and thus are cheaper.)
how are the renewal fees set, are they related bid made
That's what I would like to know too. Either that, or the prices are the normal fees of the chosen registrar. I don't know which.
certain instances can choose not to federate with other instances
I've not seen this yet, how does this manifest?