It's my understanding that this was more like an added shim layer in the kernel, and that it just communicates to the (still proprietary) code now in firmware. In other words the blob moved, but it's still there, just shimmed. Maybe somebody with more knowledge of this codebase can weigh in?
Certainly this pattern of responding to pressure to open source code by shimming the blob is quite common. It's very common in network gear that runs Linux, for example.
There's a very important difference: that firmware runs in a separate processor, which assuming a working IOMMU (and that firmware has to assume a working IOMMU, since the IOMMU is controlled by the main processor), can only influence the GPU itself. Having all the code running in the main processor be open has a large benefit, and gives a lot of control back to the user. It also allows for faster evolution of the platform (for instance: the whole EGLStream vs GBM debate would be less of an issue if the kernel code was open), and even completely replacing the main processor itself (for instance, does the proprietary NVIDIA driver have a RISC-V version of its blob?).
The userspace driver is where most of the secret magic is on any GPU, it's in charge of building the command buffers that are submitted. All the work to translate GL/Vulkan/Direct3D takes place in the userspace driver, and it's the majority of the codebase by far. The kernel driver being open-source means most of the hardware-communication stuff is upstream.
A combination of firmware and hardware interpret the command buffers and run the rest of the GPU pipeline. Firmware is used for power/clock management, managing the on-board GPU cache, queue balancing, running the front-end, and various other bits & bobs. None of this would replace any Linux or Windows driver code, it replaces dedicated hardware.
I once put this exact argument to a network vendor's rep at a conference, after they'd introduced a really thin shim like this, with some fanfare. You know what his answer was, live on stage for all to hear?
"but it's open source"
If open sourcing proprietary code is the goal, as it has always been mine, then this sort of thing is very much a step backwards.
This also opens the door for any other kernel (like the BSD's) to speak to Nvidia's firmware without needing to do any reverse engineering. As well as gets Nvidia out of the way in terms of adopting new stacks like DRM-KMS. They are just no longer a blocker on that now since that's all handled by the now open source "shim" (which is still more than a shim)
Its a step backwards too, because the firmware is now signed and therefore unmodifiable, but that was a problem before the recent code release too.
Indeed, nVidia open sourced the kernel portion of their drivers a few weeks ago.
https://github.com/NVIDIA/open-gpu-kernel-modules
This is, at least for now, a somewhat limited release (only supports Turing and newer, only really tested for Tesla etc., which shows where the paint point is), and not mainlined (yet? Probably the long-term goal).