Excessive logging of forests in the past century has resulted in [what becomes known as deforestation].
Excessive logging of forests in the past century has resulted in what known as deforestation.
What is the role of WHAT in these sentences?
Your #2 version is ungrammatical.
Your #1 version is fine. The word "what" is the relative word that heads a fused-relative construction. What is happening in your sentence is that the word "what" is doing two functions at once: it is the relative word beginning a relative clause (the stuff inside the brackets), and it is the antecedent for the relative word. That is, your #1 version is similar to:
- Excessive logging of forests in the past century has resulted in [something which becomes known as deforestation].
In the above example, the antecedent is the word "something", and the word "which" is the relative word that begins the relative clause. But in your version #1, the word "what" has to fulfill both of those functions: it's equivalent to the phrase "something which" in the above example.