It seems like after I watched it for a few minutes I realized that it breaks the rules of pixel art, it actually moves them at fine resolution, at least the "cool" looking parts where you're like "How did he do that?" I noticed certain parts aren't pixelated like the crosshair, and then realized the super smooth movement is basically the pixel graphics moving at high res coordinates so they look really smooth.
Perfectly doable in any engine, but
does take skill to look good
Ohh, sorry, just remembered what the op is about, yeah all destructible. Still that is quite simple, just a huge buffer filled with a byte per pixel, what material it is, which includes nothing\destroyed, there is also a shader or some kind of system which renders the edges of the solid parts.
All of this is completely do able in gm, you've just gotta do quite a lot of research or basically work out how to do it.
I did this: (I never ended up finishing it, at least in a way that I thought was acceptable to share, it probably could be useful though for someone interested to see how you start off with this kind of thing)
https://forum.yoyogames.com/index.php?threads/2d-destructible-terrain-starter-kit.47954/
And I made a shader about a year after that: (haha this is funny looking back, it's about the same game Noita, and I posted pics of my shader that read an image and added grass and under parts (basically the edges I was talking about) to it:
https://forum.yoyogames.com/index.php?threads/advanced-pixel-perfect-mining.70452/#post-416853