So many reasons that I am very skeptical of this concept. First off, the obvious fact that if you truly believe in Bitcoin like most Bitcoin fans and myself, we also believe we can make profit off of just hodling. When Bitcoins price goes up 10 fold, does the amount you loaned also go up 10 fold? Probably not. Are these Bitcoin banks insured by the FDIC? Probably not, no way the FDIC is insuring Bitcoin. Once these "Bitcoin Banks" have massive amounts of Bitcoin in there hand they will be huge targets and will get hacked eventually, guaranteed. History has shown many examples of such already. Not to mention do we really trust banks? No way, thats what led me to Bitcoin in the first place, so I can be my own bank. Do I want banks gambling with my Bitcoin? Nope, I remember the housing crisis, doesn't everyone else? You think the government will bail out "Bitcoin Banks"? Of course not. Say theres a fork, think you are going to be able to claim split coins? Nope, because the Bitcoin isn't in your account. Want to get your Bitcoin back early? Too bad, unless you want to pay the fee for pulling out early, fees that can easily be more than the interest earned on your loaned Bitcoin.
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I like using Compound for Dai. You get to earn interest on your crypto while still holding the keys! I'm using it through the Argent wallet.
It however isn't decentralized at all. "Noncustodial" to an extent. The main advantage is the fact you can verify actions more since it onchain(reduces financial privacy though).
But I will digress and say Compouns is pretty cool.
I excited for some LN alts that are being made like debnk and tradelayer...