Been skimming, since some of the talk has devolved in recent posts from the materia system but I don't see the problems people seem to be up in arms about. Provided that this isn't implemented bass-ackwards then we SHOULD get better materia simply by turning HQ gear into materia, said HQ of that gear would also be better. And while there are many people who wouldn't want to turn their precious HQ gear into materia, there will be many people who WILL want to gamble it all in the hopes of a HQ materia from a HQ gear (this is assuming that the system rewards turning HQ gear to materia).
These people will be the ones who want to be the best they can be and are willing to buy (it's not like there's anything to spend gil on it seems, not in the quantities that it's been so easy to amass) the HQ gear again or make it. Even then, you'll have crafters who will no doubt turn their HQ pieces to materia and sell that. People need to think long-game here and not the short of "oh my equipment is gone, i'll need to equip NQ gear to attach materia to my HQ gear" thought.
People are already grinding out on a game that has terrible grind mechanics as it is, crafting is terrible, combat is just as bad and in many cases worse, and gathering is just about the bottom of the barrel with its double fatigue and the lack of anything above grade 5 for BTN and MIN. Yet, many have several classes at 50 and more on the way, at least this will hopefully provide a grind that is at least nominally worth doing.
Either way I applaud the dev team for coming up with something that is a more interesting system that can (I hope) be expanded upon after the infrastructure is set. What I hope people realize is that this allows for those who wish to work hard (ie grind and take risks to get HQ materia of HQ gear / slot another materia) to definitively distinguish themselves from the other players who are more than satisfied with their NQ materia from NQ gear. I see nothing wrong with this as there has been a severe issue w/ differentiation in XIV as of late, most players seem to melt together with very little to distinguish. HQ materia and multiple slotted materias will not be required from most LS/Companies, perhaps the more "hardcore" ones but otherwise people will realize the difficulty in doing so.
Aside from rare raid gear or artifact gear (which may or may not be able to be converted) most gear is fairly easy to obtain and relatively cheap, so I'm not quite clear why people seem against it. Besides, they can and will be sold en masse, many crafters simply don't bother making gear anymore because of the large amount of Crafters to Player ratio, gear simply stagnates, nobody buys then there's a massive undercutting war and gear that used to be over a hundred thousand drops to 20-30% of it's supposed value. This will give crafters who also have jobs that can wear the gear the ability to turn them into materia and help boost the economy.
We need consumables to help drive the economy back into stability, and we need to get rid of excess items, this does both. Gear will begin to stabilize some time after this lands and materia will provide a nice consumable that cannot simply be put back up on the wards.
One thing I would really like to ask though of the devs; please either make the AP rate very very slow for unoptimized equipment, or introduce a solid set of gear rank requirements for all gear. This will help to make materia from higher rank gear less flooded, and it also prevents RMT (for when the game actually becomes live enough for said RMT to start trying to make mass gil) from donning R50 gear at R1 and botting/grinding away just to undercut people who have gotten to R50 and wish to make the materia to sell. At the same time, I hope this doesn't go for crafters - I'd prefer a fixed crafting system intead of needing to grind out hundreds of synths to get AP for my gear. It should be only for DOM/DOW to allow them much needed flexibility.