Operating some server software on the wimpy VPS is very different different from having everybody's daily-use computers be fully networked with other computers. Also, you likely already have an Internet connection so the marginal cost is zero. And you don't need a credit card to do it.
To get network effects, it's all about low friction and low barriers to entry.
There is still a long way to go to make it work for your grandparents, however I think we already made quite some progress. The act of getting a domain and a server itself is still something most people might not be comfortable with though.
In the end I think there are only technical issues to be solved to get to a state where having a server and installing apps, just like most people now do with mobile apps on their phone, is entirely viable.
Here's the announcement, they moved back from being a for profit startup to an open source community effort. Most of team is now working at cloudflare.
To get network effects, it's all about low friction and low barriers to entry.