Blocking an instance on a user by user basis has a key drawback in the sense of those instances you block can still influence the posts and comments via up and down votes

Defederating basically means that those instances no longer have any influence on the community you're a part of

Basically think of it this way, say you're on a queer friendly instance that is still federated with a right wing instance. That right wing instance can manipulate the posts of the queer friendly instance by up voting queerphobic content and down voting queer positive content. And you block the instance as a user those votes still federated over so you'll see queer positive content getting down voted to oblivion.