Legitimate use for these things is essentially zero, the only one you see people promote in any detail is the use of loans to avoid capital gains tax but that *does not work*, because that activity is a "constructive sale" as any clueful accountant could tell you.
Is this some consequence of the structure of "defi" lending contracts? I hadn't paid them much attention, but a quick search showed several where you use BTC or ETH as collateral for a loan denominated in some "stablecoin". That leaves you exposed to the risk of (paper) losses if BTC or ETH declines, so it doesn't seem like a constructive sale to me, unless the IRS is treating all cryptocurrencies as substantially similar assets (which might be warranted given the amount of obfuscation alts try to pull off).