Message content can be fully end-to-end encrypted. Federation needs some unencrypted metadata. Some of it can be reduced, but some will be needed for federation to work. Signal probably needs less unencrypted metadata, but you lose federation.

Please encrypt user identifiable data like the recipient of a message such that only the recipient can read it

The amount of required metadata to maintain federation is very small. Some matrix instances operate in this minimalist or near minimalist domain, but in my experience, getting folks to share their custom forks of matrix requires some social schmoozing.

For better or worse, much of the fediverse is made up of small enclaves of hyper-paranoid tech weirdos who have often reinvented the wheel over and over, each in their own little group, which is a big problem for the casual person who wants to toss a server on a home server for friends and family.

And I say this as one of these hyper-paranoid tech weirdos. The network's growth is immensely stifled by the fact that people aren't keen on sharing, or building user friendly tools for the normies.