First of all I want to start this by stating that I am in a neutral nation with no direct ties to any M.A (mega alliance).
So right now there are no drawbacks to mega alliance, I am not saying that mega alliances are bad or good. I am simply stating that M.A needs to be balanced... having M.A in a server is healthy but we are approaching a point where M.A is the only viable option for nations (new and old) to survive.

So here I am going to explain the CURRENT advantages and disadvantages of M.A and how to balance them:

(For any high ELO league of legends player, this will feel like a meta read and fix )

Advantages

1. Provides extensive protection, almost immediate, and an instant diplomatic placement in ccnet (I.e u get a place on the board, u get to join sieges and naval, u get to be part in ur allies dc)

2. Access to M.A infrastructure , often at a reduced price and sometimes free, to be used in sling shotting new nations/buffing up existing nations( think of it as any new nation joining the M.A would get guns, duct tape and machines and older nations would get better movecraft designs and ammo silos)

3. Immediate Economy buff. "Join us and we will help u print your fort" (less relevant to older nations, but very substantial for new nations) and any embargoes with allies is lifted

Disadvantages:

1. Invites chaos, war and fighting to your nation by new earned enemies. More nation would and will attack you, you will be forced to battle to defend your allies forts.

2. Enemies and distance nations that are not accepting of your mega alliance. Players and towns won't trade with your nation, you will be kicked/banned from enemy dc server and you will be refused any service or help. So generally this will be a hit to your nation's economy in the long run

3. Heavy reliance on allies for defensive/offensive sieges, as having more allies will induce more help for your enemies (if you make allies and bring them to your sieges, your immediate enemies will do the same to level the playing field

Ofcourse M.A have more advantages and disadvantages but we will focus on the diplomatic/war side of them as that is what affects the balance


In summary: M.A should allow you to have strong diplomatic standing and backup, an immediate boost to your economy and an army of movecraft and pvpers for sieges.
On the other hand, belonging to the mega alliance should have a negative impact on your economy in the long run, force you into more battles and slowly make you and everyone in your M.A dependent on each other

So how is this balanceable? How can we change the dynamics of the server without changing the core and essence of M.A and without affecting any existing diplomacy mechanics? Well the answer lies with 3 systems: economy, the DP system and the Embargo system.
1. Embargoes: enforce the Embargo. If 2 nations are enemies an Embargo between them is automatically placed and cannot be lifted. Furthermore if there are 4 nations who are allied to each other and all enemies of another 4 nations who are also allied to each other(MA VS MA) the Embargo is automatically placed on all of them

2. Nerf silver farming hard: you cannot have geopolitics without trade, and duo to how easy it is to farm silver, a nation can sustain itself economy wise(printing,upkeep and war chests) with only silver farming. So even if they have 0 trade they can survive. Best course to lower silver profits is just lowering the silver output from sifted ore

3. DP system: re introduce the DP system for allies only, alliances are now based on distance between capitals. And DP is earned based not on how many people are in a nation, but the average player to fort ratio it has to Insensitive local expansion( a fort should be constructed not to siege enemies for SOI range, but to protect and enable local peaceful towns). more players/towns dependent on a fort should mean that the fort is more consicouinsal to the nation it is in, thus shifting the focus to important forts (if you occupy an important fort for a nation it would significantly lower the amount/quality of their alliances)

As an example let's take Rome:
Currently rome has 15 allies, and 2 main forts (thexan and livland). We will assume with new DP introduction it will be limited to 10 allies (just for this example, real numbers I need server wise information that I do not have) with 100 members tied to thexan and 100 members tied to livland. If ever thexan falls under occ it wouldn't affect how many allies rome could have, however if rome decided it wants extra SOI range to siege florintina or help say Canada do that they would need to build a new fort in NA, but it won't have roman population around it so the overall number of allies rome can have will be lowered.

On the other hand a small nation like say rock island(#free rock island) would be limited to 1 or 2 allies only meaning they need to think about who they want as allies(drawback) but if it is ever sieged and occupied the nations who occupy them will have their number of allies reduced duo to the low Pop to fort ratio of Rock island

So tl dr: the bigger you are the harder it is for you to support all of your allies in your MA, and the smaller you are the more you need to focus on your own nation to survive long term

And yes naval regions are accounted for: less members availabe in each naval battle duo to lower number of allies, and for example if Quin wants to make sure rome can't have SOI range to help Canada siege flor that can focus on NA naval region hard and take it from rome forcing rome into a difficult choice of either supporting Canada by making a fort in NA and lowering it's number of allies for their own Defencive sieges or not helping Canada at all and letting it be a 1v1 between Canada and flor