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Yes, there was a lot of buzz about a keyboard like that from Art Lebedev* for several years prior to Apple's touch bar.

* https://en.wikipedia.org/wiki/Optimus_Maximus_keyboard

The only real function would have been to have customizable icons in that case because you can already assign shortcuts to different functions keys and per app contexts with apps like Hammerspoon

But their only usecase that I remember was a touch sliding bar.

I don't know if that would have worked as individual buttons.

No, you lose the best part - sliding!