However recently (and widely discussed on HN[1]) Microsoft has started censoring the entire ecosystem, to the point where you can get banned from all servers for chat behavior in one server, because your MC account is now your MSFT account. So they can just ban the latter to block you from all of MC (except for cracked servers).
"People doing their own moderation" includes a community of people who get together, appoint moderators, and enforce their own rules.
The people appointing moderators are part of the central entity, unless you mean that the trolls being muted also have a say in it. Show me one such server that is not a tiny one with just a bunch of friends, where moderation is not needed anyway.
For example, I used to play Rocket League. I played either solo or teamed exclusively with a few friends and mutual acquaintances. They have various settings to mute the chat and comments from other people. I'm not interested in all in hearing flames or nonsense chatting from random people I'm playing against, so I have all chat muted except for team chat (people I know and choose to team with). This is doing your "own moderation", and is the ideal circumstance is far as I'm concerned.
Unfortunately, however, Rocket League doesn't allow you do your own moderation, despite the proper tools being available. One time, someone I was teamed with (who similarly had all non-team chat muted), typed something in team chat that ran afoul of Rocket Leagues sensibilities, and they subsequently received a week-long ban. Nobody could see this chat except our team (myself and this other person). We had already engaged in our "own moderation" by muting everyone else. This was an overreach as far as I'm concerned, and would far prefer to have the power to see and hear what I choose, and not what the platform chooses.