This is an unfortunate failure of community engagement. Apparently the feature was in beta for months, but given that most people don't use the beta or follow the development of their terminal emulator, it shouldn't be a surprise that there was pushback after release. Usually when introducing a controversial change, you want to do additional community outreach.
It's also a minor UX failure. The onboarding screens weren't loud enough about the need to provide an API key.
I really feel for the maintainers here. They added a cool thing to their popular-for-a-reason terminal emulator, and (from their perspective) people lost their minds over a misunderstanding or (again, from their perspective) unreasonable expectations.