How it works (to simplify) is them giving up on matrix clients ever becoming performant and well behaving on handheld devices (because of the absurd complexity of the protocol), and, instead of doing something about that, just decided to shift the client logic onto the server and castrating the clients (esp. for offline features). It's also good short-term business because it makes hosting Matrix even more cumbersome and expensive, giving a compelling reason for the type of midscale/corporate deployments previously on the fence about their self-hosting costs (due to poor design and scalability) to just pay Element for that (while probably contemplating an alternative future).