As to why compete with imgur? User experience. It's much easier to share a picture on Reddit now, with it being a native feature, rather than having to go to imgur or elsewhere, upload something, find the best/right URL to share with, and the submit that to Reddit.
I have a feeling that this image upload thing was dreamed up by an intern who thought "oh, this would improve our user flow!" while not realizing it might literally double the company's costs in exchange for a gain of a few percentage points more users.
Reddit can't run obtrusive ads (they'd piss off their user base) so where is that money going to come from?
Example reddit url: https://i.redd.it/2n0gpcrfes4z.jpg
Example imgur url: http://i.imgur.com/ykbUTZG.jpg (and that can even be shortened to http://imgur.com/ykbUTZG)
And those URL lengths are both fine. No one is typing those in manually very often. (Reddit's URLs used to have a bunch of long query params - those were a bit ridiculous)
presumably ownership of the image.