There's an issue with the way Lemmy handles user uploads that makes me uncomfortable leaving them enabled. Without getting too deep into the technical details of the matter, the issue leaves my server open to abuse and does so in a way which is both invisible to the admins and difficult to rectify.
Until that is resolved by the upstream project, I have opted to disable user uploads entirely as a precautionary measure. While the "upload image" button is still present in post/comment options, any uploads will be rejected by the server; you will see a red error message saying "Type error: Failed to fetch" when attempting to upload. If you're using Jerboa or another native app, it may fail with a different message, but it will fail (as-intended).
Please note that this decision was not reached lightly and is the only currently-known way to ensure the safety and integrity of the platform. If you wish to embed images in your submissions, until further notice, please embed them from an outside source (imgur, giphy, getyarn.io, your own server, etc). If you're an old Redditor, this should be familiar.
This also affects setting your avatar and banner in your profile. Unfortunately, I have no way of allowing just those to remain functional while disabling comment/post images; the method I have to use to block uploads is somewhat all-or-nothing.
If you would like to set an avatar/logo, please DM me and I can make an arrangement to do it on the backend.