Please be aware that user-level instance blocking is not the same as instance-level defederation. User-level instance blocking is equivalent to blocking all the communities from that instance. AFAIK you’ll still see posts and comments from the blocked instance in other communities. More problematically, the blocked instance still influences your feed via its votes.
Can you do that yet without your instance just entirely defederating?
Yes. Go to: settings > blocks > scroll down
At the end of the page, below your blocked users and communities, there is a list of instances, which you blocked. You can add instances there aswell.
Please be aware that user-level instance blocking is not the same as instance-level defederation. User-level instance blocking is equivalent to blocking all the communities from that instance. AFAIK you’ll still see posts and comments from the blocked instance in other communities. More problematically, the blocked instance still influences your feed via its votes.