> Perhaps this was done to optimize video encoding, since the less noise/surface detail there is the easier it is to compress.

If so it's really just another kind of lossy compression. No different in principle from encoding a video to AV-1 format.

Given the denoising is said to be aggressive enough to be noticeable on already compressed video I think criticism of it is fair. Just that it should be distinguished from something like Tiktok's 'beautifier' modifications, which from titles like the BBC's come to mind.