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I think you might really be asking about sustainability, not profitability (profit is what you have after all the bills are paid). It's generally donation-based. I'm sure different communities will have different ways of soliciting donations.
EDIT: I'm no longer partial to the below. I much more like PrimalAnimist's suggestions.
~~For larger, expensive instances, I'm partial to determining the cost of running a single user over some period of time (say, 5 years), and posting that little datum on the community info. Then, each user that donates that amount gets a badge reward. Users that pay double the minimum get a different badge, and so on. Cycle the badges every n years. Some users will have fancier badges, displaying a kindness for the poor and badgeless. Cultivate a culture of gratitude for those who support, and you won't have to worry so much about not having enough.~~
I dislike this idea because it creates "tiers" of users. Communities might not allow comments from anyone without at least the basic donation badge. Donations incentivized with perceived perks are made with selfish intent. The capitalist system has trained us that in order for people to do something, they must be given a sufficient reward.
This is not true. Using rewards as incentives to motivate people will create division among individuals. When rewards are introduced, the focus shifts from intrinsic motivation and personal satisfaction to the external reward itself. This leads to a competitive mindset where individuals start comparing themselves to others solely based on the rewards they receive.
For example, I've seen something as simple as a user tag being used to restrict and divide a community. (r/conservative comes to mind first).
Honestly, I share your concerns. I'm only recommending it for very expensive instances that aren't receiving enough funding, as an alternative to directly soliciting funds. The beauty of the Fediverse is that if an instance admin tried doing something like punishing the "poor and badgeless," we could all just fuck off. It would alleviate their financial burden, to boot 😃
I get you, I just don't like tying social status to badges and icons that denote financial contribution. That's Elon Musk style. Another solution is you could sell merch for example. And creators on the server could donate artwork they make to be sold on merch like t-shirts, hats, handbags, etc. instead of donating cash.
But, if the intrinsic value of helping keep an instance going isn't enough motivation, there're many other successful methods to implement before resorting to awarding visible badges. Here are a few strategies to increase financial engagement:
Transparency: Provide clear and transparent information about how donations are utilized and the specific projects or initiatives they support. When users understand how their contributions make a difference, they may be more motivated to donate.
Collaboration: Foster a sense of collective ownership and involvement by actively involving users in decision-making processes. Allow them to suggest and vote on some decisions, creating a sense of shared responsibility.
Gamification: Instead of special badges, incorporate gamification elements that track collective progress toward a shared donation goal. Create visual representations or progress meters that show how close the community is to reaching a specific target, encouraging users to contribute and help achieve the goal together.
Impact Reporting: Regularly update users on the impact of their donations. Provide reports or updates that detail how the funds have been utilized and the outcomes achieved. Demonstrating the tangible results of their contributions can strengthen user trust and encourage continued support.
Basically, any way that a person can feel or see their contributions (and importantly the support of the greater community along with them) for the instance will increase engagement.