I posted a reply to the above comment but the tldr is this is just for straight up slurs and does not ban you but may be used to flag comments for review once that's set up.
It does not limit discussion and is only for the most basic form of racism/hate. Trying to catch all instances with a filter isn't realistic and that's not the goal here.
If you click on 'Instances' link on the very bottom of a page you can check who is defederated. Right now it looks to just be: burggit.moe lemmygrad.ml