Assuming that bullets are just an entity that spawns from a rifle, with pre-determined velocity and direction, I am guessing it would be possible to make things like Frag Grenades spawn a lot of "bullets" that are flying out in random directions.

If it is possible to have such entities deal more or less damage depending on distance, then it would be pretty easy to handle the balance, by making them lose most of their damage after traveling more than 16 blocks.

One grenade could spawn dozens or even hundreds of bullets, and then actually finding cover, jumping into holes or just "hoping" that most of the fragments miss you would make sense. As of now, grenades simply are not used at all due to them taking up valuable hotbar space that can otherwise be used for health potions. Their damage is also so low that when you are in close enough range to be dealing damage with grenades, it might just be better to use a sword. Also, tuning their damage up might or might not be a good idea because of how ganks and tight spaces that can be packed with lots of players work. So, by making grenades throw fragments that can be "body blocked" by players in my opinion solves the issue with them being too strong when thrown into a tight crowd.
One person takes the most of the fragments and possibly dies and nobody else gets affected.

Another issue with grenades is that they take quite a lot of time to detonate, so just not walking close to one makes them completely useless. Which would not be the case if it may or may not throw 10 "bullets" at you at a time, even if you are decent distance away.

If this mechanic seems reasonable, then it can also be used for ordinary explosions to fix the fact that they are so easy to ignore and most of the times don't deal damage unless they hit directly. Having 10 shells near-miss you could get you pelted with fragments if you are unlucky. And just standing out in the open while getting shelled shouldn't ever be a good idea.