Its a ticking time bomb.
No doubt, the Brexiteers will claim that a system of electronic tracking and tracing of goods is sufficient to prevent a hard border; but that seems another fantasy and ultimately the EU will have a veto in deciding whether such solutions are adequate.
As a matter of logic, a frictionless border between NI and RoI -as it exists today- can only be secured within the customs union and single market and must apply to all sectors, not just sectors such as agriculture which are at the heart of NI trade with RoI. After all, with a sector-specific deal, you'll still need border checks to assess whether or not the transported good falls under the covered sector.
Anything less, however efficient, will mean the return of some form of border - thus Norway which is in the EEA and has harmonised regulation does not have frictionless trade with Sweden since it is not in the customs union, meaning that rules of origin compliance need to be checked; Switzerland is in a similar boat with its borders. Note both Norway and Switzerland are in the Schengen area of passport-free travel.
While some compromises may emerge, its hard to see EU and especially RoI accepting a solution that strays too far beyond current arrangements given the sensitivity of the issue. And whatever applies to NI will be imposed on the rest of the UK per today's report.
This issue will come back to haunt negotiations. Its the long grass for now.