The second issue is the impermanent loss liquidity providers incur. Liquidity providers rent out their tokens to DEXs so users can swap tokens in exchange for a profit. However, most of the markets in DEXs are unprofitable for liquidity providers due to the price change of the asses provided.
On Interest Protocol liquidity providers can use their LP tokens as collateral to borrow Dinero, an overcollateralized stablecoin. This allows them to invest this loan in other instruments such as other DeFi dApps, NFTs, long cryptocurrencies, etc... The proceeds from investing the borrowed money, coupled with the fact that these loans have no cost and the collateral tokens keep accruing rewards, make it quite easy to offset the impermanent losses.