Possible idea for loot and functionality

I saw a loot system in a game that was interesting in the concept of making powerful items while also cutting out ground loot for reducing visual glitches and cutting down on system overload.

essentially the game had items that were a "base type" and then when items matching that base type dropped those items wouldn't spawn or drop, instead they were converted to a exp type of data that would be applied to the item and essentially level it up, those levels could then be rolled on the item to then unlock modifiers that could then be selected. levels could also be rolled to then increase the numerical values of the unlocked mods

the randomness came in the level rolling where you could potentially get things you do or don't need. This added a lot of play value while also opening an exciting grind concept, while cutting down on the amount of loot needed to be rolled or generated.

If interested the game is on steam and it is called "voin".

I was theory crafting ways to incorporate this because i personally really liked the way the system felt, it felt very considerate of my time, opened up new build ideas and concepts, while also making even white drops valuable. however i was having problems with how it could be implemented. part of me thinks it could be a set of unique items that can have certain mod slots rerolled for currency infinitely, and then the points could be an item based exp bar that unlocks certain mods and mod tiers as you continue to level the item, however i felt like this was just the current system for rares but targeted to the mod level and might be extremely exploitable.

another concept i was drawing up was if it could be some form of tree on the item, similar to crucible, but instead the tree is the same across all items of this type and the item levels unlock new nodes or scale up an existing node at random. you can then select 6 nodes to add to the item to fill it out, or even that the nodes can be a selection of 12 or so that roll differently between different version of the item.