I can see that being possible... my instinct would be that it would be far more volatile - higher when we're on a bull run, lower when we're not, and more prone to jump about all crazy-like.

You'd have a steady stream of auto-lenders taking random pot-shots at whatever's available from the swap requests (hopefully not all of them - some would just take anything above zero but surely at least some would wise up and start at least picking a rate to auto-renew at once a day... and some would probably just leave), and that regular slow-trickle dump would indeed weaken the incentive for traders to take offers when they can just wait for a lowball 'market' offer... which might actually make the 'requests' side of the book relevant (and thicker at sensible rates) rather than just a queue of hopefuls waiting for someone to dump almost-free funding on them.

But even while full-auto lenders chew through the swap requests, without that giant anchoring wall on the offer-side, it'd also be that much easier for a rush of traders in a hurry to chew through the offers up to ~0.7%, as we've seen when the wall goes down before. That's why I'm thinking it would erode both sides and leave the going rate more freely wandering. Might be overall higher or lower, who knows, but that might well be more representative of the true supply/demand.

I can see the value in the FRR as a place to put all the lazy money so it can be stored up safely rather than unleashed all at once onto an unprepared set of 'requests', but I do still wish the wall would move when people start taking it; respond to the apparent demand by moving rates up a li'l bit to test whether there's still demand at that higher rate, then move back down if there isn't. I'm just going to keep saying that until either you're sick of hearing it or you become convinced.