If you're sensible and use small input images, and therefore small hashes, it should be fine. It's not actually doing all that much 'work'. Besides, browsers are much faster than people think they are, especially for things like canvas drawing because that happens on the GPU (even in a 2d context.)

I assume that creating blurred images is pretty expensive.

The input image is converted to a hash. When the placeholder is needed the hash is converted to a gradient. Essentially it's like picking a few points in an image and then using a gradient function to fill in the spaces between the points. That's something that's easy for a computer for do quickly.

Also, as it happens, blurring an image is fast too. You can implement a Gaussian blur in a convolution filter, and that's just a simple matrix.