For a really quick summary, Thorchain provides Uniswap style liquidity pools such as BTC/RUNE that allow people to do one shot trades that can be routed across major blockchains, and liquidity providers collect fees on every trade. Typically liquidity providers are also exposed to RUNE due to the nature of how XYK liquidity works. These new vaults are special because they lack RUNE exposure, but they are also only allowed to make up something like 10% of the liquidity pool, so deposits are limited.
I've been incredibly vocal about how anything promising >10% yields is a scam. It's the reason I built ponzi.finance (which never got popular, but was fun while it lasted). Yields greater than 10% are always either temporary, or straight up fraud. I'd still tend to agree with Erik though that your claim that you can't earn yield on BTC was incorrect, though the counter-party risk at the time was not ideal. Counter-party risk is, of course completely unavoidable in legacy finance systems, and the overhead costs to properly mitigate it are (IMO) unsustainable in a world with easily accessible DeFi tooling.
Obviously Erik did not mean via centralized exchanges. You can lend your Bitcoin on countless decentralized protocols for those yields- even risklessly with flash loans via a dApp like Aave. With non-risk-free lending you can assess and knowingly accept your desired level of risk via fully auditable open ledgers.
If you withdraw more than your interest and in some other crypto than your collateral then your loan now has leverage. During that particular withdraw transaction you will have signed some logic which can automatically liquidate your lent crypto if the amount you withdrew (minus interest) becomes worth less than your collateral.
Until that pre-signed liquidation transaction executes you are fully in control of the balance and keys.
