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Before migrating to Lemmy, I decided to request a copy of the data Reddit has on me.
To my surprise, the export includes a file ip_logs.csv with a list of all IP addresses that I used to connect to Reddit for the last 3-4 months!!
That seems quite unnecessary.
Because collecting data that is not strictly necessary is almost always a bad move. IP addresses might be relatively harmless, but might link you to other activities.
You personally might be okay with reddit knowing your IP addresses, but some people might get into trouble.
Take the insane anti-abortion laws in some US states. If an IP address from those states accesses pro-choice subreddits, that might be enough for law enforcement to start harassing someone.
Not 100% applicable here, but some websites use stored ip addresses as a safety measure, since a stored ip address' location can be compared against that of the current login attempt. This way, a guy trying to steal your account from the other side of the world would be flagged and you'd be alerted via email and such.
You're asolutely right, IP addresses are kind of a grey area since the are needed for lot of troubleshooting and debugging.
Nevertheless, you can always strive to reduce the stored data.
For your application, you wouldn't even need to store the historic IP adresses, just a rough geo-location and maybe a mobile/landline/whatever-flag and comparing the current login attempt to that. Even saves you some performance by not repeating the geo-lookups everytime.
Implement your failed-login counter separately by account and source IP and you've got decent security without linking an account to an IP.