IMO, the mute function is needed because community mods need to filter content so they can protect the feed from spammers and abusers. The negative effect can be if someone mutes just because they can, as I said, it can be subjective.

Before, it was common to have very strict rules, like for example a no more than one post every 24 hours, but there were cases when the post had 23 hours, and the mod muted the post. So that post was "lost". With this option, the author would not lose that post.

And when a post is muted in a community, it is also muted in the feed of the tags. SO if I used #sports, for example, and the sports community mutes my post for whatever reason, no one will see my post when checking the #sports tag.