The soil ends up hydrophobic(I think that's the word. Water stops soaking in, just runs off) on the surface, and thin layer of plant oils and waxes build up where the water comes to, then the very bottom decomposes to dust, and the whole soil level drops in a big plug like mass.
It works ok short term, 12months or so on medium-large plants, then they need to be mixed and "repotted".
I have used a similar system with 20lt buckets, 44gallon drums and IBC tanks in the bush during the dry times. Bigger containers work better for longer.
Kept stuff alive, minimized water loss, but yeah, not ideal. When water is an issue then ideal is out of the question so I will no doubt do it again.
Gravel and rock on the bottom with large spaces for a water catchment, medium grain in the middle with high surface area for fats and waxes to bind to, and fine material on the top.
Slows the degradation, but yeah, closed system is quickly depleted unless you are able to add compost and life like worms(or lawn grubs. They eat the compost before the plant roots so on the whole, when managed correctly, I reckon they are beneficial) to redistribute the layers evenly as time goes on.
Best (in my limited experience) to have a freely draining medium, like a sandy soil mix, and recycle the water after it drains through the soil.
The period of dry is needed as plants need the water pockets in the soil, to fill with air between watering.
Constant water causes root rot with most stuff on a long enough time line.
The same issues happen with drip irrigation VS sprinklers in large scale commercial farming.