This is a great system for the longevity of the game - it means after the game has been out for years and years the market won’t be flooded with perfect items (at least not nearly as badly as games without this system).
This is good for everyone except maybe those that Originally make the perfect items, but even they can benefit from it as the value of a perfect item with potential left on it will be extremely sought after.
This also prevents things like Twinking, to a certain extent.
It is IMO one of the best systems implemented in a game that has an itemization system where you upgrade items +1-10 or more.