Yes but without VSCode wouldnt Atom be like vscode: having many unfree extensions?

Better use something that will keep the apps up to date. Some recommend Obtanium, I don’t like it, it’s not user friendly/easy but I don’t know any better alternatives.

How did they crush open source competition?

The MS store is replaced by OpenVSX by the Eclipse Foundation. Some addons are not there. E.g. M$ closed source addons e.g. for remote development over ssh or their python and C# extensions.